2011 (10) TMI 156 - AT - Income Tax

Tribunal Allows Appeals, Disallows Set-off, Orders Re-examination of Deduction Claim

Ballabgarh Co-op. Milk Producer´s Union Ltd. Versus Income-tax Officer, Ward 1(2)

Ballabgarh Co-op. Milk Producer´s Union Ltd. Versus Income-tax Officer, Ward 1(2) - TMI Issues Involved:1. Set off of brought forward losses against the income of the relevant assessment years.2. Disallowance of deduction under section 80P of the Income Tax Act, 1961.3. Charging of interest under sections 244A, 234B, and 234C of the Income Tax Act, 1961.Detailed Analysis:1. Set off of brought forward losses against the income of the relevant assessment years:The primary issue was whether the assessee, a co-operative society formed by the bifurcation of an old society, could set off brought forward losses from the old society against its income. The assessee argued that the losses should be carried forward and set off against the income of the new society, as it was a re-organization and not a new entity. The assessee relied on several judicial decisions to support its contention. However, the assessing officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)] rejected this claim, stating that there was no provision in the Income Tax Act allowing such a set-off. The Tribunal upheld this view, noting that under section 78(2), the right to carry forward and set off losses belongs to the person who suffered the loss, and not to a different person. The Tribunal concluded that the creation of a new society on splitting up of the parent society cannot be treated as inheritance, and thus, the provisions of section 78(2) were not applicable.2. Disallowance of deduction under section 80P of the Income Tax Act, 1961:The AO disallowed the deduction under section 80P on the grounds that it was not claimed in the returns of income. The assessee contended that the deduction should be allowed as it was a statutory deduction available to every co-operative society. The CIT(A) rejected this contention, stating that the assessee's activities did not fall under the specified activities in sub-sections (2)(a) and (2)(b) of section 80P. However, the Tribunal found that the assessee's case falls under the residuary provisions of section 80P(2)(c) of the Act, which allows a deduction of Rs. 50,000/- for profits and gains attributable to activities other than those specified in clauses (a) or (b). The Tribunal set aside the matter to the AO to examine the claim and allow the deduction as per the provisions of section 80P(2)(c).3. Charging of interest under sections 244A, 234B, and 234C of the Income Tax Act, 1961:The assessee challenged the charging of interest under sections 244A, 234B, and 234C. The Tribunal upheld the AO's decision, stating that charging of interest under sections 234B and 234C is mandatory as per the decision of the Hon'ble Supreme Court in CIT v. Anjum M. H. Ghaswala. Regarding the interest on refund under section 244A, the Tribunal noted that the refund arises on processing of the return of income under section 143(1) and not on completion of assessment under section 143(3). Therefore, the assessee could not take up the issue of interest on refunds in the appeal filed against the order under section 143(3).Conclusion:The appeals were partly allowed for statistical purposes. The Tribunal upheld the disallowance of the set-off of brought forward losses and the charging of interest under sections 234B, 234C, and 244A. However, it directed the AO to re-examine the claim for deduction under section 80P(2)(c) and allow the deduction of Rs. 50,000/- if applicable.