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TaxTMI 
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2023 (1) TMI 647
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....ght of evidence, probabilities and the facts and circumstances in the Appellant's case. 2. The Appellant denies itself Liable to be taxed over and above the total business toss of Rs. 363,82,18,993/- declared by the appellant on the facts and circumstances of the case. 3. The learned Commissioner of Income Tax [Appeals] is not justified in upholding the disallowance made by the learned assessing officer on account of provision for bad and doubtful debts amounting to Rs. 492,74,01,516/- under Section 36[1][viia] of the Act on the facts and circumstances of the case. 4. The learned authorities below failed to appreciate that the provision for bad and doubtful debts is governed by Section 36[1][viia] of the Act and the words used are 'in respect of any provision', thus the authorities below failed to appreciate that as long as provision is made in the books of accounts, the appellant is eligible for claiming deduction under section 36[1][viia] of the Act since it is a specific deduction given by the statute irrespective of the quantum provided by the assessee in its accounts towards provision for bad and doubtful debts, and consequently the learned authorities below ....
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....appeal be allowed in the interest of equity and justice." Additional grounds of appeal : "1. The authorities below failed to appreciate that the appellant is a Cooperative Society being a Rural Regional Bank and consequently not hit by the prohibition under section 8oP(4) of the Act, on the facts and circumstances of the case. 2. The appellant is eligible to the claim of deduction under section 8oP of the Act, on the facts and circumstances of the case. 3. The authorities below ought to have allowed the deduction under section 8oP of the act, by adhering to Circular 14/1955, of the Act, on the facts and circumstances of the case. 4. The assessee denies itself to be assessed as an AOP, and ought to have been assessed as a Co-operative Society, and the order passed in the wrong status is required to be set aside as bad in law, on the facts and circumstances of the case. 5. The Appellant craves leave to add, alter, amend, substitute, change and delete any of the grounds of appeal. 6. For the above and other grounds that may be urged at the time of hearing of the appeal, the Appellant prays that the appeal may be allowed and justice rendered." 3. The brief facts of the c....
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....ggrieved from the order of the CIT(A), the assessee as well as revenue is in appeal before us. 6. The ld.AR filed written synopsis, which is as under:- "The appellant begs to submit the under mentioned additional grounds of appeal which were not urged specifically in the grounds of appeal filed before the learned Commissioner of Income-tax [Appeals], Hubli. These grounds do not involve any investigation of any facts otherwise on the record of the department and are also pure question of law. It is humbly prayed before this Hon'ble Tribunal that the additional grounds may kindly be admitted and disposed off on merits for the advancement of substantial cause of justice. Reliance is placed on the decision of the Hon'ble Apex Court in the case of National Thermal Power Company Limited Vs. CIT, reported in 229 ITR 383 and also on the ratio of the decision of the Hon'ble Karnataka High Court in the case of Gundathur Thimmappa & Sons Vs. CIT, reported in 70 ITR 70. 2. Whether the assessee being a Regional Rural Bank (RRB) is a Cooperative society for the purpose of deduction under section 8oP of the Act? Brief History: a) The Central government after consultation with....
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....l Rural Barks. b) The provisions of section 80P(4) has been introduced to deny the claim of deduction under section 8oP, to Co-operative banks, other than "Primary Agricultural Credit Societies" and "primary co-operative agricultural and rural development bank". The explanation to this sub-section defines co-operative banks as follows: "Explanation. -For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (io of 1949);" In Part V of the Banking Regulation Act, 1949 (io of 1949) the term cooperative bank is defined as follows: (cci) "Co-operative bank" means a state co-operative bank, a central cooperative bank and a primary co-operative bank Further the above terms are defined in the said act as follows: (ccv) "primary co-operative bank" means a co-operative society, other than a primary agricultural credit society,- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are not less than one lakh of rupees; and (3) the bye-la....
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....ous reading of the various provisions indicate that section 8oP(4) excludes and denies benefits only for a co operative bank and not a regional rural hank and consequently a RRB cannot be denied exemption under section 80P 4. In this regard reliance is placed upon the decision of the Allahabad Tribunal in the case of Baroda Uttar Pradesh Gramin Bank v. Deputy Commissioner of Income Tax, Sultanpur in [2018] 169 lTD 656 (Allahabad -Trib.), which has been upheld by the Allahabad High Court in [2022] 138 taxmann.com 449 (Allahabad)I15-o3-2o22] 5. The appellant summarises its contention as follows; a. What is excluded under 80P(4) is only a co - operative bank and not a regional rural bank. b. That there are three types of banks, i.e. scheduled banks, co - operative banks and Regional Rural Banks. c. The definition of cooperative bank for the purpose of 8oP is as per banking regulation act. d. The Banking regulation Act defines co operative bank as per NABARD, [See section 5 (cci) read with ccvii read with section 56(C)]. e. The NABARD Act, also defines the different class of banks [see Sec 2 (d), (p) and (q) of NABARD Act] f. Section 22 of the regional rural bank clearl....
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....ming deduction u/s 80P(2a)(i) within the frame work of Circular No.14/1959 of the Act to which the lower authorities have not granted. 9. On the other hand, the ld.DR relied on the order CIT(A)/ AO in regard to sec.36(1)(vii)/36(1)(viia) of the Act has been decided by the Hon'ble jurisdictional High Court of Karnataka in the case of CIT Vs. Syndicate Bank [2020[ reported in 422 ITR 460 [kar[ that the issue is decided in favour of the revenue, therefore, reopening made by the lower authorities have been justified and addition should be upheld. 10. We have heard both the parties and perused the entire materials on record and examined the orders of the lower authorities, we observe that additional ground raised by the assessee first time before us. and the assessee has dealt this issue by filing additional ground by holding that it is a legal ground which could be raised any point of time. Considering the judgment of Hon'ble of Supreme Court in the case of National Thermal Power Company Ltd., Vs. CIT, 229 ITR 383 (SC) the additional ground filed by the assessee is accepted. 11. We further observe that the assessee is a regional rural bank and formed with the merging of four regiona....
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....erent Acts according to which, the assessee is a cooperative society for the purpose of Income-tax Act. The Hon'ble High Court of Allahabad has decided the similar issue in the case of PCIT Vs. Baroda Uttar Pradesh Gramin Bank reported in [2022] 138 taxmann.com 449 for the assessment year 2012-13 to 2016-17 in favour of the assessee. The relevant part of the decision is as under:- "3. It has been admitted before us that the respondent-assessee is a Primary Cooperative Agricultural and Rural Development Bank. It has also been admitted before us that the respondent/assessee is a Bank, established under section 3 of the Regional Rural Banks Act 1976. The respondent/assessee claimed deduction under section 80P of the Income-tax Act, 1961(hereinafter referred to 'as the Act, 1961') on the ground that it is a Cooperative Society and, therefore, in terms of the provision of Section 22 of the Regional Rural Development Banks Act,1976 (hereinafter referred to 'as the R.R.B Act, 1976'), it is entitled for deduction under section 80P of the Act. 4. The assessing authority has not accepted the claim of the deduction on the ground that the respondent/assessee is not a Cooper....
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....ricultural credit society" and "primary cooperative agricultural and rural development bank". It is also proposed to insert a new sub-clause (viia) in section 2 (24) so as to provide that the profits and grains of any business of banking (including credit facilities) carried on by a cooperative society with its members shall be included in the definition of 'income'. This amendment takes effect from 1st April, 2007 and apply in relation to the assessment year 2007-08 and subsequent years. (Clauses 3 and 19)" From aforesaid facts, intension of Parliament is very much clear and deduction under section 80P is not allowable to Regional Rural Bank and any cooperative bank. 5. However, it should be kept in mind that 80P (1) and 80P (2) (I) shall never be read in isolation rather it should always be read in association with 80P (4). The selection 80P (4) is introduced by Finance Act, 2006 w.e.f 1-4-2007 to clear any doubt while claiming deduction under section 80P (1) and 80P (2) (II) FURTHR CBDT ISSUED "circular no. 6/2010 (F. NO. 173 (3)/44/2009-IT (A-1) DATED 20-9-2010 C to give more and more clarity on 80P deduction. Therefore, the assessee is assessed as status of AOP....
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....e central issue involved in all these appeals is whether 'appellant RRB is entitled to claim exemption under section 8OP(2)(a)(i) of the Act, on the ground that Regional Rural Banks in general had been notified as "Cooperative Society" by virtue of insertion of section 22 read with section 32 of Regional Rural Bank Act 1976. Further, whether such a claim is adversely affected by insertion of sub- section (4) below section 80P, by the Finance Act 2006. To find out answer for such issues, it would be useful to trace the history of section 80P as well as of Banking Regulation Act, 1949 and Part-V thereof as had been inserted to the main statute, i.e., Banking Regulation Act 1949, in the year 1965. 39. The section 80P of the Act' had been inserted, in substitution of section 8l of the Income-tax Act 1961, by the Finance Act (No.2) of 1967, (20 of 1967), w.e.f. 1-4-1968. The purpose behind such a substitution, was to enlarge the scope of deduction as used to be permissible under erstwhile section 81 (the then) of the Act. In terms of section 81, rebate on certain types of income had been provided, whereas in terms of section 8OP, full and outright deduction of income earned fr....
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.... the "appellant RRB" is, by virtue of section 22 read with section 32 of Regional Rural Bank Act 1976, and not by circular no. 319 dated 11-1- 1982 as had been issued by CBDT, as had been opined, by the Authorities below. Therefore, insertion of sub-section (4) below section 80P, and/or withdrawal of the said Circular no. 319 dated 11-1-1982 in the wake of insertion of bar by virtue of sub section (4) had not gone to adversely affect 'claim for exemption' from income tax as had been put forth by the "appellant RRB". The "appellant RRB" continues to be having the status of a "cooperative society" enjoying the benefit of exemption. 50. For taking such a view, about interpretation of Regional Rural Bank Act, vis-à-vis sub-section (4) of Income-tax Act, 1961, we are fortified by the decision rendered by Hon'ble Supreme Court in the case of Reserve Bank of India vs. Peerless General Finance and Investment Co. Ltd. reported in (1987) 1 SCC 424 wherein it has been held that: "interpretation must depend on the text and the context. They are the basis of interpretation. One may well say if the text is the texture, context is what gives the colour. Neither Can be 1gnor....
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.... settled that if a transaction comes within the letter of the law it has to be taxed, however great the hardship, but if it does not, it cannot be taxed, however great the loss may be to the public exchequer. The view was best expressed by Lord Cairns in Partington v. Attorney General [1869] 4 LR 100 (HL) as follows (at page 122): If the person sought to be taxed, comes within the letter of the law he must be taxed, however great the hardship may appear to the judicial mind to be. On the other hand if the Court seeking to recover the tax, cannot bring the subject within the letter of law, the subject is free, however apparently within the spirit of the law the case might otherwise appear to be. The principle of strict interpretation of taxing statutes was best enunciated by Rowlatt J. in his classic statement: In a taxing statute one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax. There is no presumption as to a tax. Nothing is to be read in, nothing is to be implied. One must only look fairly at the language used. In A.V. Fernandez v. State of Kerala (1957 8 STC 561; AIR 1957 SC 657, the Supreme Court of India ....
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....ollege of Technology (1995/supp 2 SCC 348. When we say that a word has a certain meaning then by implication we mean that it has no other meaning vde a Punjab Land Development and Reclamation Corporation Ltd. v. Presiding Officer, Labour Court/1990] 77 FJR 17; |1990) 3 SCC 682. However, when certain other categories are added then it means that only those additional categories will be included within the definition and none others, Vide Mahalakshmi Oil Mills v. State of A.P 1989 1 SCC 164; 1988) 71 STC 285 (SC)" The aforesaid judgment had received affirmation also, from the Hon'ble Supreme Court in the case of CIT v. Sahara India Savings and Investment Corporation Ltd. reported in [2010] 321 ITR 371." 54. So far as claim of exemption of its income is concerned, we have noted the decision of Hon'ble Supreme Court in the case of Citizen Co-opèrative Society Ltd. v. Asstt. CIT [2017] 397 ITR 1, dated 8-1-2017, wherein denial of the appellant's claim for exemption, by the authorities below had been upheld, owing mainly 'to the bar contained in subsection (4) of section 80P of the Act. The facts of the said case were, that it was a "cooperative society" regist....
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....sion made in the foregoing paragraphs, it is abundantly clear that the Assessing Officer and so also the ld. CIT (A), had gone off the tangent, while deciding/adjudicating the appellant's claim for exemption under section 80P(2)(a)(i), owing mainly to the reason that they have failed to interpret the provision contained in section 22 of RRB Act 1976 and also the significance of section 32 of the said statute, which had the effect of making the overall statute i.e. Regional Rural Bank Act 1976, of over-riding nature. Both these sections have been reproduced by us earlier in this order. A perusal of the said sections would clearly mean that the "appellant RRB" is a "cooperative society" and accordingly sub-section (4) below section 80P of the Income-tax Act would not operate as a bar to its claim for exemption and accordingly, we set aside the findings given in the related assessment orders as well as appellate orders so far as appellant's claim for exemption under section 80P(2)(a)(i) is concerned. The Assessing Officer would recompute the income after allowing deduction under section 80P(2)(a)(i), as per our findings given here-in-fore. 58. Before parting with the issue o....
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....ssessment year 2009-10 to 2011-12 in favour of the assessee. 15. Respectfully following the above decisions, we hold that the assessee is a cooperative society for the purpose of Income-tax Act and assessee is eligible for claiming deduction as per sec. 80P(2)(a)(i) of the Act. The provisions of sec.80P(4) will not apply in the case of the assessee. Accordingly, the additional ground Nos.1 and 2 raised by the assessee is allowed. Necessary computation shall be followed by the AO as per law. 16. In ground No.3 the assessee has raised that the deduction u/s 80P of the Act should be given by the Revenue authorities on the basis of Circular No.14/1955. Since we have directed to the AO for giving necessary computation as per law, therefore this ground becomes consequential in nature. 17. The assessee has raised in ground No.4 that assessee is not an AOP but it is cooperative society, whereas the authorities below has passed the order in the status of AOP, therefore, the order should be set aside. 18. The assessee has himself obtained PAN No. in the capacity of AOP [AAAAK 6324 Q] and from the alphabets of PAN, it is clear that the assessee is an AOP, the arguments taken by the assess....