Indur Intideepam Producers MA Cooperative Societies Federation Limited Vs ITO (ITAT Hyderabad)
Conclusion: Deduction claimed by assessee in return of income which was directly relatable to the insurance activities, as it did not fall under section 80P(2) i.e., Insurance activities. Accordingly, the matter was remanded back to the file of AO for the limited purposes of verifying the deduction claimed in return of income and to pass a fresh order after affording due opportunity of hearing to the assessee in accordance with law.
Held: Assessee-cooperative society was providing credit facilities to its members. It filed return of income along with claiming deduction under section 80P. AO noted that assessee was mainly in the business of lending services for guarantee payments. Since the income earned by assessee was from business which was not covered under section 80P, AO opined that assessee was not eligible for deduction. Hence, he disallowed the deduction claimed by the assessee and added it to the returned income of the assessee and thus, completed the assessment u/s 143(3) of the Act and passed assessment order. It was held that assessee could claim the deduction in respect of the gross total income earned by assessee from the activities mentioned in sub-section (2) of Section 80P. Undoubtedly, the activities of the insurance did not form a part and parcel of carrying on the business of banking and providing credit facilities to its members. The activities of the insurance did not fall within the realm of the banking activities as banking activities were separate and distinct from the insurance activities. There was no reason to state that assessee was entitled to any deduction under section 80P. AO was only entitled to disallow the deduction claimed by assessee in the return of income with respect to insurance business. It was proper to remand back the matter to the file of AO for the limited purpose with a direction to disallow the deduction claimed by the assessee in return of income which was directly relatable to the insurance activities, as it did not fall under section 80P(2) i.e., Insurance activities. Accordingly, the matter was remanded to the file of AO for the limited purposes of verifying the deduction claimed in return of income and to pass a fresh order after affording due opportunity of hearing to the assessee in accordance with law. In case, assessee failed to file any documents in support of its case, AO should decide the matter in accordance with the law.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal is filed by the assessee feeling aggrieved by the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.24.09.202 1 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
2. The captioned appeal filed by the assessee is barred by limitation by 581 days. The assessee has moved a petition requesting the bench to condone the delay. In this connection, the assessee has filed an affidavit for condonation of the said delay wherein, it was, inter-alia, affirmed that due to lock down imposed by the central government as preventive measures to contain the spread of Covid- 19 form 23/03/2020, caused the impugned delay in filing the appeal belatedly. We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits.
3. The grounds raised by the assessee read as under :
“1) The order of the learned CIT (A) is erroneous both on facts and in law.
2)The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the deduction u/s 80P(2) of the T. Act.
3)The leaned CIT (A) ought to have seen that the appellant is entitled for deduction u/s 80P of the I. T. Act and the claim for deduction of Rs.38,22, 78 1/- should have been allowed by the learned CIT (A).
4) The learned CIT (A) erred in holding that the appellant is not eligible for deduction u/s 80P (2) on the ground that the activities of the appellant also include micro insurance premium, NPS contribution, loan insurance premium etc.
5) The learned CIT (A) ought to have seen that the exemption is allowable u/s 80P and in the alternate on the principles of mutuality and the learned CIT (A) ought to have allowed the exemption in total.
6) The learned CIT (A) ought to have seen that it is a credit society formed for working on the co-operative principles and, therefore, is eligible for deduction.”
4. The brief facts of the case are that assessee is a Co-operative Society providing credit facilities to its members. It has filed its return of income for A.Y. 20 17-18 on 03.11.2017, declaring a total income of Rs. 12,21,740/- after claiming deduction of Rs.38,22,781/- u/s 80P of the Act. The case was selected for Limited Scrutiny under CASS. Thereafter, notice u/s 143(2) of the Act was issued to the assessee on 14/09/20 18 and E-proceedings were initiated. Thereafter, notice u/s. 142(1) dated 29.01.2019 was issued to the assessee. In response, the assessee vide reply dated 06.12.2019 submitted computation sheet and Registration certificate. Thereafter, a notice u/s 142(1) dated 28.06.2019 was issued to the assessee whereby the assessee was requested to file certain particulars as called for on or before 05.07.20 19. However, the assessee failed to furnish any information. Assessee was accorded final opportunity through the issuance of show cause notice dated 11.12.2019 requesting to furnish the reply/information on or before 16.12.2019 as called for by the notice u/s 142(1) dated 28.06.20 19.
4.1. In response, the assessee filed replies dated 12.12.2019 and 21.12.2019. The assessee vide letter dated 21.12.2019 stated that the society has been operating on the same line as that of several previous years. Thus, Assessing Officer noticed that the assessee was mainly in the business of lending services for guarantee payments i.e. services like life security investment policies, like insurance and pension funds and other related services and earning commission. From the Receipts and Payments Statement, Assessing Officer observed that major receipts were received under the heads “Miro Insurance premium from MACS, NPS contribution from MACS, etc., Since the income earned by the assessee was from business which was not covered under section 80P of the Act, Assessing Officer opined that the assessee was not eligible for deduction. Hence, he disallowed the deduction claimed by the assessee and added it to the returned income of the assessee and thus, completed the assessment u/s 143(3) of the Act and passed assessment order dt.23. 12.2019.
5. Feeling aggrieved with the order of Assessing Officer, assessee filed appeal and thereafter, it was migrated to the ld.CIT(A), NFAC, Delhi, who dismissed the appeal of the assessee by observing as under :
“6.5 During the appellate proceedings, the appellant has mainly relied on the argument that these incidental services were provided to members like provident fund, Life Insurance for the benefit of members and were in a bona fide faith claimed as allowable. The appellant has also stressed that it has provided services to members only.
6.6 From the records, it is seen that out of total receipts of Rs.16,01,11,047/-, interest on loan is only Rs.91,66,381/- whereas receipts related to the income from services narrated by Assessing Officer are given below :
