Case Law Details
Zila Sahkari Bank Ltd Vs DCIT (ITAT Delhi)
ITAT Delhi held that disallowance of genuine claim of depreciation merely because the depreciation figure is not reflected in column no. 45 of ITR is unsustainable in law. Action of lower authorities of disallowing the genuine claim of depreciation on a very flimsy reason is unjustified.
Facts- The assessee is challenging the disallowance of depreciation of Rs. 97,94,657/- on fixed assets as per Section 32 of the Act and addition made u/s. 69 r.w.s. 115BBE of the Act for the same.
Conclusion- The only reason adduced by the lower authorities for not allowing the depreciation was that the assessee has not filled the depreciation figure in the relevant column of ITR, i.e., in column No.45 of the return in Part-A – P& L Account in the ITR form. We find that the assessee had mentioned the depreciation figure of Rs.1,00,46,380/- under column No.39 in sub-item No.14 under the main head: ‘Other expenses’ in the ITR. Though mentioning of depreciation figure in column No.39 under the head ‘Other expenses’ was a mistake, still, the depreciation figure together with the computation thereon had been enclosed and claimed properly by the assessee in the return of income. This figure of depreciation of Rs.1,00,46,380/- duly tallies with the depreciation figure mentioned in the P&L Account of the assessee also. Hence, we do not appreciate the action of the lower authorities in disallowing the genuine claim of depreciation on a very flimsy reason. We also condemn the action of the lower authorities in invoking the provisions of section 69 of the Act r.w.s. 115BBE of the Act for the purpose of disallowing the claim of depreciation of the assessee, without even understanding and appreciating the fact that the provisions of section 69 of the Act , by no stretch of imagination, could be applied in the instant case. We direct the ld. AO to allow depreciation in the sum of Rs.1,00,46,380/-. Accordingly, ground No.2 raised by the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal in ITA No.914/Del/2021 for AY 2015-16 arises out of the order of the Commissioner of Income Tax (Appeals), Ghaziabad [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal No.358717431080118 dated 31.07.2019 against the order of assessment passed u/s 143(3) of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 22.12.2017 by the ld. Assessing Officer, Circle-3(1), Bulandshahr (hereinafter referred to as ‘ld. AO’).
2. At the outset, we find that there is a delay in filing the appeal by the assessee by 639 days. An affidavit was filed from the present Secretary of the assessee stating that the previous Secretary, who was looking after income-tax matters had been transferred to another branch, and due to that, there was a delay in filing the appeal before this Tribunal. The Bench on earlier occasion had directed the assessee to file an affidavit from the concerned Secretary, who was taking care of the income-tax matters at the relevant point in time. This affidavit was filed by the concerned Secretary Mr. Sagirudin Siddique on 08.05.2023 before the bench which reads as under:-
3. In our considered opinion, there was sufficient cause in not filing the appeal before us in time. Hence we are inclined to condone the delay and admit the appeal of the assessee for adjudication.
4. The ground No.1 raised by the assessee is as to whether the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of dividend income.
5. We have heard the rival submissions and perused the material available on record. The assessee is a cooperative society engaged in the business of banking activities. The assessee derived dividend income of Rs.20,22,600/- and claimed the same as exempt u/s 10 of the Act in the return of income. This dividend was received from IFFCO. The ld. AO observed that the exemption u/s 10(34) of the Act could be claimed by the assessee only when the amount has been subjected to dividend distribution tax in the hands of the payer in terms of section 115-O of the Act. The ld. AR argued that this issue was decided in favour of the assessee by the appellate authorities, but, the AO had made this addition only in order to keep the issue alive. We find that the issue in dispute is squarely covered by the decisions of this Tribunal in assessee’s own case in ITA No.3913/Del/2016 for AY 2012-13, dated 18.09.2018 and in ITA No.5030/Del/2018 for AY 2014-15 dated 4th May, 2022. For the sake of convenience, the order passed by this Tribunal in this regard for AY 20 12-13, referred to supra, is reproduced hereunder:-
“3. The assessee is a cooperative society derives income from banking activity and house property. Return declaring income of Rs. 3,50,53,910/- was E-filed on 27.09.2012. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had credited the amount of Rs. 1,82,02,860/- on account of dividend under the head gross receipts which had been claimed exempt in the computation of income. It was also observed by the Assessing Officer that the IFFCO from whom dividend was received was not a company but was a cooperative society and dividend distribution tax had not been deducted by IFFCO. It was held by the Assessing Officer that the dividend income was not exempt in the hands of the assessee. Thus, the amount of Rs. 1,82,02,860/- was disallowed and added to the income of the assessee.
4. Being aggrieved by the Assessment Order, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. DR submitted that the dividend received from IFFCO is exempt u/s 80P(2)(1) of the Income Tax Act, as per the claim of the assessee. But the Assessing Officer rightly observed that Section 115O of the Income Tax Act 1961 provides special provisions relating to tax on Distributed Profit of Domestic Since, no tax on the dividend received by the assessee has been paid by the dividend paying society, being cooperative society, therefore, the dividend income cannot be exempted in the hands of the assessee. Therefore, the Assessing Officer rightly added Rs. 1,82,02,860/- to the income of the assessee. The Ld. DR submitted that the CIT(A) in deleting this addition.
6. The Ld. AR relied upon the order of the CIT(A).
7. We have heard both the parties and perused all the relevant material available on record. In the present case, dividend received from IFFCO and UP Cooperative Bank Ltd. are exempt u/s 80P(2)(1) of the Income Tax Act, 1961 as IFFCO and U.P. Cooperative Bank Ltd. are cooperative society. The CIT(A) held as under:-
“4. Having considered facts of the case and rival contentions, the appeal is decided as under:-
4.1. All the grounds of appeal except ground No. 4 being inter-related are against the addition of Rs.1,82,02,860/- being disallowance of dividend income received form IFFCO and U.P. Cooperative Bank Ltd. During appeal proceedings the appellant has made written submission, the relevant para is reproduced as under:-
“……………….. Unfortunately the claim of exemption in respect of dividend income of the appellant considered with reference to the provisions of section 1150 and section 10(34) was not correct as the claim is admissible u/s 80P(2)(d) of the Income Tax Act. It may be submitted that the appellant is a cooperative society and the dividend paying concern i.e. Indian Farmer Fertilizer cooperative Ltd. is also a society. Since the dividend income derived by the appellant is from a concern which is also a cooperative society, the whole of such income is exempt u/s 80P(2)(d) of the I.T. Act. It may very humbly be submitted that exactly similar issue had also arisen in the assessment year 2007-08, 2009-10, 2010-11 and 2011-12 where Ld. Predecessors and your honor had been pleased to accept the claim of the appellant. Copies of those decisions are enclosed herewith for ready reference.
In view of the above submissions, the appellant is entitled to exemption in respect of total income of Rs. 18202860/-/- from div idend.”
4.2 The facts of the case as well as submission made by the appellant have been carefully considered. It is observed that the Assessing Officer had made addition of Rs. 1,82,02,860/- holding that dividend income received from IFFCO is not exempt. The aforesaid cooperative society had not paid tax on dividend paid to the appellant as per provisions of section 10 (34) r.w. Section 1150 of the Act. On the other hand the appellant has vehemently argued that dividend income received from the aforesaid cooperative society was exempt u/s 80P (2)(d) of the Act. It is also contended that the A.O. has ignored the fact that part dividend has come from U.P. Cooperative Bank. The appellant has also furnished copies of the order of CIT (A) wherein in similar facts and circumstances, the CIT (A) in their orders dated 20.09.2013, 21.02.2014, 23.02. 2015 & 17.04.2015 had allowed the appeals of appellant for A.Yrs. 2007-08, 2009-10, 2010-11 & 2011-12 respectively. To decide the impugned issue let us go through the relevant provisions of the Act.
Section 80P(2)(d) of the Act says-
“in respect of any income by way of interest or dividends derived by the co operative investment with any other co-operative society, the whole of such income.”
The appellant has received dividend from IFFCO and U.P. Cooperative Bank Ltd, which are cooperative society. As far as IFFCO is concerned, the fact that it is a cooperative society is an established fact in earlier years and this year also the A.O. has mentioned that it is a cooperative society. As far as the U.P. Cooperative Bank Ltd. is concerned, the A.O. has not mentioned anything about it. I have verified that it is cooperative society as is ascertainable from the Registration Certificate produced by the appellant and on my behest the appellant has also produced I.T. Return of the Bank wherein the status is mentioned to be cooperative society. Even otherwise it is not the case of the A.O. that U.P. Cooperative Bank Ltd. is a company. Thus, the amount of Rs. 1,82,02,860/- being dividend received from the aforesaid cooperative societies is expressly exempt u/s 80P (2)(d) of the Act. Similar view has also been taken by the CIT (A) in appellant’s own case for A.Ys. 2007-08, 2009- 10, 2010-11 & 2011-12. In view of the above, it is held that the Assessing Officer is not justified to make addition of Rs. 1,82,02.860/-. The same is deleted and related grounds of appeal are allowed.”
The CIT(A) has extensively given the finding and followed the earlier years orders. The Ld. DR also could not point out whether the Revenue has challenged the earlier years order or not. There is no need to interfere with the findings of the CIT(A). Thus, we are following the rules of consistency and thus, appeal of the Revenue is dismissed.
8. In the result, the appeal of the Revenue is dismissed.”
7. Respectfully following the same, the ground No.1 raised by the assessee is allowed.
8. Ground No.2 raised by the assessee is challenging the disallowance of depreciation of Rs.97,94,657/- on fixed assets as per section 32 of the Act and making the addition u/s 69 r.w.s. 115BBE of the Act for the same.
9. We have heard the rival submissions and perused the material available on record. It is not in dispute that the assessee had maintained regular books of account which are duly audited by a firm of Chartered Accountants and presented before the Registrar of Cooperative Societies. The accounts of the assessee are also subjected to audit by NABARD on behalf of the Reserve Bank of India. The only reason adduced by the lower authorities for not allowing the depreciation was that the assessee has not filled the depreciation figure in the relevant column of ITR, i.e., in column No.45 of the return in Part-A – P&L Account in the ITR form. We find that the assessee had mentioned the depreciation figure of Rs.1,00,46,380/- under column No.39 in sub-item No.14 under the main head: ‘Other expenses’ in the ITR. Though mentioning of depreciation figure in column No.39 under the head ‘Other expenses’ was a mistake, still, the depreciation figure together with the computation thereon had been enclosed and claimed properly by the assessee in the return of income. This figure of depreciation of Rs.1,00,46,380/- duly tallies with the depreciation figure mentioned in the P&L Account of the assessee also. Hence, we do not appreciate the action of the lower authorities in disallowing the genuine claim of depreciation on a very flimsy reason. We also condemn the action of the lower authorities in invoking the provisions of section 69 of the Act r.w.s. 115BBE of the Act for the purpose of disallowing the claim of depreciation of the assessee, without even understanding and appreciating the fact that the provisions of section 69 of the Act , by no stretch of imagination, could be applied in the instant case. We direct the ld. AO to allow depreciation in the sum of Rs.1,00,46,380/-. Accordingly, ground No.2 raised by the assessee is allowed.
10. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 22.05.2023.
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