AI Drafter 
TaxTMI 
TaxTMI 
2016 (4) TMI 826
X X X X Extracts X X X X
X X X X Extracts X X X X
....rence to section 80P(4) of Income Tax Act, 1961; hereinafter, 'IT Act'. Issues are also raised relating to the validity or otherwise of the returns filed by the assessees beyond the period stipulated under section 139(1)/(4) or section 142(1)/148 for the purpose of deciding exemption under section 80P of the IT Act. Incidental issues relating to doubtful debts proportionate to the gross total income and the status of rural branch to claim deduction referable to section 36 (1)(viia) of the IT Act are also raised. 2. Heard Snr.Adv.Firoze B.Andhyarujina and Snr.Adv.T.M.Sreedharan and other learned advocates for the appellants and Snr.Adv.P.K.R.Menon, learned senior standing counsel for the Government of India (Taxes) assisted by Adv.Jose Joseph, standing counsel for Income Tax Department and Adv.Ajay V.Anand. 3. ITA.No.212 of 2013 was admitted on 21.11.2013 and the following substantial questions of law were formulated at the time of admission for consideration: A) Whether on the facts and in the circumstances of the case under consideration, the Tribunal is correct in law in deciding against the assessee, the issue regarding entitlement for exemption under section 80....
X X X X Extracts X X X X
X X X X Extracts X X X X
....urns. Some of the cases are those were returns were filed belatedly; some relate to claim of exemption after best of judgment assessments; and, yet another group relates to cases where notices were issued under sections 147 and 148 of the IT Act which may have a bearing on the question of delay. 8. On behalf of the department, it is argued that the Tribunal was justified in holding that the appellants are not entitled to exemption in terms of section 80P(4) and therefore, they fall into the tax net by virtue of section 80((1), subject only to the permissible deductions under sub- section 2 of section 80P. The findings of the Tribunal are sought to be supported also as regards the belated filing of returns and claim for exemption. It is argued that the appellants are, essentially, Co-operative Banks; and, not merely primary agricultural credit societies; and hence the appellants' plea as to exemption under section 80P(4) is unfounded. 9. Section 80P of the IT Act deals with deduction in respect of income of co-operative societies. Sub- section 1 of that section provides that where, in the case of an assessee being a co-operative society, the gross total income includes any....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the coverage of section 80P. The argument advanced on behalf of the Revenue, to the contrary is repelled. 13. Reverting to section 5(cciv) of the BR Act; 'primary agricultural credit society' means a co- operative society, the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops; and the bye-laws of which do not permit admission of any other co-operative society as member. However, the provisions in sub-clause 2 of section 5(cciv) shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co- operative society out of funds provided by the State Government for the purpose. This is the effect of the proviso occurring after sub-clause 2 of section 5(cciv) which is referred to herein only for continuity, though we are not really concerned with the effect of that proviso. Keeping in mind that 'primary agricultural credit society' is defined with reference to the term 'co-operative society'; reverting to section 5 (cci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tive Societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2 (oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating to such applicants. 16. The position of law being as above with reference to the statutory provisions, the appellants had shown to the authorities and the Tribunal that they are primary agricultural credit societies in terms of clause (cciv) of section 5 of the BR Act, having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of the appellants do not permit admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye-laws of any of the appellant or its classification by the competent authority under the KCS Act is anything different from what we have stated herein above. For thi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....xemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible. 20. Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption will also stand effectuated as a claim duly made as part of the returns so filed, for due consideration. 21. When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre-assessment enquiry is carried forward by issuance of notice under section 142 (1) or when notice is issued on the premise of escaped assessment referable to section 148 of the IT Act. This position notwithstanding, when an assessment is subjected to first appeal or further appeals under the IT Act or all questions germane for concluding the ass....