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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Before: Shri George George K, JM & Shri Laxmi Prasad Sahu, AM
IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN Before Shri George George K, JM & Shri Laxmi Prasad Sahu, AM ITA No.241/Coch/2021 : Asst.Year 2013-2014 ITA No.245/Coch/2021 : Asst.Year 2014-2015 ITA No.246/Coch/2021 : Asst.Year 2015-2016 Chirakkal Upabokthru Sahakarna The Income Tax Officer Sangam Limited, No.C1480 Ward 1 & TPS(I/C) v. Kannur – 670 011. Kannur. PAN : AABAC6661K. (Appellant) (Respondent) Appellant by : Sri.G Surendranath Rao, CA Respondent by : Smt.J.M.Jamunna Devi, Sr.DR Date of Pronouncement : 23.05.2022 Date of Hearing : 20.05.2022 O R D E R Per Bench : These appeals at the instance of the assessee are directed against three orders of the CIT(A), all dated 11.10.2021 The relevant assessment years are 2013-2014 to 2015-2016.
Common issues are raised in these appeals, hence, they were heard together and are being disposed of by this consolidated order. Identical grounds are raised in all these appeals, except for variance in figures. The grounds relating to assessment year 2013-2014 reads as follows:-
“1. The Order of the Commissioner (Appeals) is against facts and law. 2. The Commissioner (Appeals) should have appreciated that, the powers of the Assessing Authority while processing a return u/s 143(1) is extremely limited. The AO can only make
2 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited. prima facie adjustments which are apparent from the return filed. Only mistakes in law, arithmetic mistakes, incorrect claims apparent on the records, excess loss or disallowances apparent which are not disallowed etc, can be adjusted. The issue whether the appellant is eligible for deduction u/s 80P is not a matter that can come within the ambit of prima facie adjustment authorised u/s 143(1). The disallowance of the claim u/s 80P in the intimation is not in accordance with law and hence a mistake apparent on the records in the intimation. The appellant was well within its rights to file a rectification petition before the Assessing Authority to rectify this mistake. An order refusing to rectify a mistake is an appealable order u/s 246 and the hence the Commissioner (Appeals) has erred in dismissing the appeal on the grounds that the appeal should have filed against the intimation and not the order u/s 154. 3. Without prejudice to the above, the Commissioner (Appeals) should have appreciated that interest received by a cooperative society from any other co-operative society is exempt from tax without any condition as per the provisions of section 80P(2)(d). Your appellant had interest from Kannur District Co-operative Bank Ltd., amounting to Rs.1,13,8601-, which as the name implies is a society registered under Kerala Co-operative Societies Act 1969. After such formation, the society had obtained a license from Reserve Bank of India to carryon banking business. Exemption was claimed u/s 80P on this amount. There was no justification for the Assessing Authority to disallow the claim in the intimation u/s 143(1) as a prima facie adjustment. The Assessing Authority should have known that the interest received by a co-operative society from another co-operative society is exempt from income tax without any condition or limit u/s 80P(2)(d) of the Income Tax Act. The disallowance of the claim was hence without any basis. PRAYER For these and such other grounds that may be urged at the time of hearing, it is prayed that the prima facie adjustment made by the AO in the intimation be set aside.” 3. The brief facts of the case are as follows: The assessee is a consumer credit society, registered under the Kerala Co-operative Societies Act. For the assessment years 2013-2014 to 2015-2016, the returns of income were filed by the assessee by claiming deduction u/s
3 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited. 80P of the I.T.Act. The Assessing Officer, CPC, issued intimation u/s 143(1) of the I.T.Act for the assessment years 2013-2014 to 2015-2016 partially denying the deduction claimed u/s 80P of the I.T.Act. The deduction denied was on the interest income received by the assessee on deposit with Kannur District Co-operative Bank Limited.
The assessee filed petition for rectification of intimation before the jurisdictional A.O. for the above mentioned assessment years. The A.O. rejected the application for rectification by holding that the interest income received by the assessee society was not from co-operative society but from a co-operative bank, and therefore, not entitled to deduction u/s 80P(2)(d) of the I.T.Act.
Aggrieved by the orders rejecting the rectification application for the assessment years 2013-2014 to 2015- 2016, the assessee filed appeals before the first appellate authority. The CIT(A) dismissed the appeals of the assessee on the ground that the same is against the order rejecting the rectification petition u/s 154 of the I.T.Act and not the intimation u/s 143(1) of the I.T.Act. The CIT(A) further held that the issue of deduction u/s 80P of the I.T.Act is a debatable one and hence beyond the scope of section 154 of the I.T.Act.
Aggrieved by the orders of the CIT(A), the assessee has filed the present appeals before the Tribunal. The learned AR submitted that the denial of deduction u/s 80P of the I.T.Act
4 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited. is beyond the scope of adjustments provided u/s 143(1) of the I.T.Act. Further on merits, the learned AR relied on the judgment of the Hon’ble jurisdictional High Court in the case of Kallara Village Service Co-operative Bank Ltd. No.3123 in WP(C) No.9415 of 2019 (judgment dated 18.10.2019).
The learned Departmental Representative supported the orders of the Income Tax Authorities.
We have heard rival submissions and perused the material on record. The powers of the Assessing Authority while processing a return u/s 143(1) is very limited. The AO could make only prima facie adjustments which are apparent from the return filed. Only mistakes in law, arithmetic mistakes, incorrect claims apparent on the records, excess loss or disallowances apparent which are not disallowed etc, can be adjusted. The issue whether the assessee is eligible for deduction u/s 80P of the I.T.Act is not a matter that can come within the ambit of prima facie adjustment authorised u/s 143(1) of the I.T.Act. The CIT(A) in the impugned orders have mentioned that the issue of deduction u/s 80P of the I.T.Act is highly debatable, however, he has not gone to the extent of holding that the prima facie adjustment in 143(1) disallowing deduction u/s 80P of the I.T.Act was not permissible. The disallowance of the claim u/s 80P of the I.T.Act in the intimation is not in accordance with law and hence a mistake apparent on the records. When the CPC made a prima facie adjustment in the intimation disallowing partially the claim u/s 80P of the I.T.Act, the assessee was well within its rights
5 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited. to file a rectification petition before the Assessing Authority to rectify this mistake rather than straight away file an appeal before the CIT(A) as the primary facie adjustment was a mistake of law. The CIT(A) should have appreciated that, an order refusing to rectify a mistake is an appealable order u/s 246 of the I.T.Act and the hence the Commissioner (Appeals) has erred in dismissing the appeal on the grounds that the appeal should have been filed against the intimation and not the order u/s 154 of the I.T.Act.
8.1 Without prejudice to the above conclusion, we are of the view that the interest received by a cooperative society from any other co-operative society is exempt from tax without any condition as per the provisions of section 80P(2)(d). Admittedly, the assessee during the relevant assessment years had only interest from The Kannur District Co-operative Bank Ltd. The Hon’ble Kerala High Court in Kallara Service Co-operative Bank Ltd, Kottayam and others Vs. The CIT (TDS), Cochin (WP (C)9415 of 2019) (B) (judgment dated 18.10.2019) has decided that a district co-operative bank is a co-operative society. In this judgment the petitioners were co- operative Societies who held deposits with Kottayam District Co-Operative Bank Ltd, Kottayam. The writ petition was filed seeking exemption from deduction of tax on the interest earned by the petitioners under s.194A(3)(v) of the I.T.Act on these deposits held by them. The main contention of the petitioners was that payment of interest by Kottayam District Co-Operative Bank Ltd to them was payment by a co- operative Society to another Co-operative Society and hence
6 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited. the tax deduction provisions would not apply being covered u/s 194A(3)(v) of the I.T.Act. The writ petitions were allowed by the Honorable Kerala High Court. Even though the said judgment was on the question of exemption to societies from Tax deduction at source on interest u/s 194A(3)(v) of the I.T.Act, the judgment has clearly laid down the principle that the interest received by a co-operative society from a co- operative bank on deposits held with such co-operative bank is interest received by a co-operative society from another co- operative society and hence would be covered by the exemption provided in section 80P(2)(d) of the I.T.Act. The judgment of the jurisdictional High Court was binding on all authorities subordinate to the High court and hence even on that premises, the prima facie adjustment made in the intimation was not justified. For the aforesaid reasoning and the judgment of the Hon’ble jurisdictional High Court, cited supra, we hold that the assessee is entitled to deduction u/s 80P(2)(d) of the I.T.Act in respect of interest income received from Kannur District Co-operative Bank Ltd. for assessment years 2013-2014 to 2015-2016. It is ordered accordingly.
In the result, the appeals filed by the assessee for assessment years 2013-2014 to 2015-2016 are allowed. Order pronounced on this 23rd day of May, 2022.
Sd/- Sd/- (Laxmi Prasad Sahu) (George George K) ACCOUNTANT MEMBER JUDICIAL MEMBER Bangalore; Dated : 23rd May, 2022. Devadas G*
7 ITA No.241/Coch/202 & Ors. Chirakkal Upabokthru Sahakarna Sangam Limited.
Copy to : 1. The Appellant. 2. The Respondent. 3. The CIT(A), NFAC, Delhi. 4. The CIT Cochin. 5. The DR, ITAT, Cochin. 6. Guard File. Asst.Registrar/ITAT, Cochin