2020 (2) TMI 883 - AT - Income Tax

Tribunal allows appeal for deduction under section 80P, rejects alternative claim.

The Tribunal partly allowed the appeals for statistical purposes, directing the Assessing Officer to examine the activities of the assessee society and ... Rectification u/s 154 - rectifiable mistake coming within the section 154 - deduction u/s. 80P(2) rejected - HELD THAT:- In the present case, the question is not making any claim by the assessee in his return of income or before the Assessing Officer during the assessment proceedings or before the CIT(A) in the proceedings u/s. 143(3) r.w.s 147 and 250 of the I.T. Act. When the CIT(A) proceeded to rectify his earlier order by placing reliance on the judgment of the Jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] the assessee made this claim before the CIT(A) on which facts relating to the mistake is not apparent on record and the related documents connected with this claim of the assessee were not at all filed either before the Assessing Officer or before the CIT(A). Being so, such claim cannot be entertained by the CIT(A) while he is deciding the issue under section 154 r.w.s. 250 of the I.T. Act. Hence, no infirmity in the order of the CIT(A) on this issue in rejecting the claim of the assessee u/s. 80P(2)(d) of the I.T. Act. Reliance placed by the Ld. AR on the judgments of the Supreme Court in the case of National Thermal Power Corporation Ltd. vs. CIT [1996 (12) TMI 7 - SUPREME COURT] and Goetze (India) Ltd. vs. CIT [2006 (3) TMI 75 - SUPREME COURT] have no application to the facts of the present case since they were delivered on different set of facts. No merit in the claim of the assessee u/s. 80P(2)(d) of the I.T. Act made during the proceedings u/s. 154 of the I.T. Act before the CIT(A). Thus, this ground of appeals of the assesses is rejected. Issues Involved:1. Legality of the CIT(A)'s order under section 154 read with section 250 of the Income Tax Act, 1961.2. Entitlement to deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Income Tax Act.3. Examination of the activities of the assessee society for eligibility of deduction under section 80P.Detailed Analysis:1. Legality of the CIT(A)'s order under section 154 read with section 250 of the Income Tax Act, 1961:The appeals were directed against the orders of the CIT(A), Thrissur, passed under section 154 read with section 250 of the Income Tax Act. The CIT(A) initially allowed the deduction under section 80P based on the judgment of the Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd. However, the CIT(A) subsequently issued notices under section 154 proposing to rectify his orders in light of the Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. CIT. The CIT(A) rejected the objections raised by the assessees and passed orders disallowing the deduction under section 80P(2).2. Entitlement to deduction under section 80P(2)(a)(i) and section 80P(2)(d) of the Income Tax Act:The assessees claimed deductions under section 80P(2)(a)(i) for their income and under section 80P(2)(d) for interest on investments. The CIT(A) had initially allowed these deductions but later rectified his orders based on the Full Bench decision, which required a detailed examination of the activities of the assessee society. The Tribunal noted that the CIT(A) should not have rejected the deduction claim without examining the activities of the assessee society. The Tribunal restored the issue to the Assessing Officer to examine the activities and determine the eligibility for deduction under section 80P.3. Examination of the activities of the assessee society for eligibility of deduction under section 80P:The Tribunal emphasized that, as per the Full Bench decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, the Assessing Officer must conduct an inquiry into the factual situation of the assessee society's activities to determine eligibility for deduction under section 80P. The Tribunal directed the Assessing Officer to examine whether the activities of the assessee society comply with the Kerala Co-operative Societies Act, 1969, and to determine the allowability of the deduction accordingly.Interest on Investments:The Tribunal referred to the co-ordinate Bench order in the case of Kizhathadiyoor Service Co-operative Bank Limited, which held that interest income from investments with treasuries and banks is part of the banking activity and eligible for deduction under section 80P(2)(a)(i). However, the Tribunal directed the Assessing Officer to follow the law laid down in the Full Bench decision and examine the activities of the assessee society before granting the deduction on such interest income.Alternative Claim under Section 80P(2)(d):The Tribunal noted that the assessees made an alternative claim for deduction under section 80P(2)(d) during the proceedings under section 154. The Tribunal held that such claims cannot be entertained in rectification proceedings if the related documents were not filed during the assessment or appellate proceedings. The Tribunal found no infirmity in the CIT(A)'s order rejecting the claim under section 80P(2)(d).Conclusion:The Tribunal partly allowed the appeals for statistical purposes, directing the Assessing Officer to examine the activities of the assessee society and determine the eligibility for deduction under section 80P. The Tribunal upheld the CIT(A)'s rejection of the alternative claim under section 80P(2)(d) in the rectification proceedings. The order was pronounced on 13th February 2020.