2015 (2) TMI 1311 - AT - Income Tax

Disallowance of deduction u/s. 80P by invoking the provisions of sec. 80P(5) - assessee neither complied with this notice u/s. 142(1) nor filed return of income in terms of section 139 or in terms of notice u/s. 142(1) and hence, the AO proceeded to initiate best judgment assessment u/s. 144 of the Act as per the notice issued u/s. 142(1) - HELD THAT - As decided in KADACHIRA SERVICE CO-OP. BANK LTD. VERSUS INCOME-TAX OFFICER, WARD-1, KANNUR THE MAVILAYI SERVICE CO-OP BANK LTD VS ITO 2013 (2) TMI 208 - ITAT COCHIN Under section 80A(5), the legislature made it mandatory that the claim under Chapter VIA under the heading C.- Deductions in respect of certain income has to be made in the return. If the contention of the assessee is accepted, then the person, who files the return of income and fails to make a claim of deduction in the return of income either by ignorance or otherwise may not get the benefit, but a person who has not filed the return of income may be in a better position to claim the benefit. It is settled principles of law that in order to avail benefits under the beneficial provision, the conditions provided by the legislature has to be complied with. Therefore,the mandatory provisions contained in section 139(1) r.w.s. 80A(5) it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction in the return itself - Decided against assessee. Exemption u/s 80P - HELD THAT - It is not a dispute that the assessees are accepting deposits from general public, maintaining savings account, providing cheque facilities, etc. as a banking business. The question arises for our consideration whether the assessees providing banking services to the general public and their members are eligible for exemption u/s. 80P of the Act. This Tribunal has discussed this issue elaborately in Kunnamangalam Co-operative Bank Ltd. 2014 (10) TMI 350 - ITAT COCHIN and Pinarayi Services Cooprative Bank Ltd. 2014 (7) TMI 1176 - ITAT COCHIN and also followed by the CIT(A) wherein it was held that the assessee are not eligible for exemption u/s. 80P of the Act. Therefore, we do not find any infirmity in the order of the CIT(A). Accordingly, the same is confirmed. Disallowance u/s. 40(a)(ia) - contention of the assessee before the lower authorities was that section 40(a)(i) is applicable only for the amount remaining to be paid as at the accounting year end and it is not applicable to the amounts already paid - HELD THAT - CIT(A) followed the order of this Tribunal in the case of Karivelloor Service Cooperative Bank Ltd. vs. ITO 2013 (3) TMI 673 - ITAT COCHIN and Smt. Prasanna Radhakrishnan Dawson vs. ITO 2015 (10) TMI 802 - ITAT COCHIN and found that the decision of the Special Bench of the Visakhapatnam Bench of this Tribunal in Merilyn Shipping Transports 2012 (4) TMI 290 - ITAT VISAKHAPATNAM is not applicable in these cases. In fact, this Tribunal in the case of Orchid Marine Vs. ITO 2014 (9) TMI 1020 - ITAT COCHIN by following the judgment of CIT vs. Sikandarkhan N Tunvar 2013 (5) TMI 457 - GUJARAT HIGH COURT found that the provisions of section 40(a)(ia) are applicable not only in respect of the amount paid but also the amounts remain to be paid as on the last day of the financial year. The CIT(A) has followed the order of this Tribunal. Therefore, we do not find any infirmity in the order of the lower authorities. Accordingly, the same is confirmed. Disallowance u/s 36(1)(viia) - HELD THAT - As AR submitted that even though the judgment of the Jurisdictional High Court in Lord Krishna Bank Ltd. vs. CIT 2010 (10) TMI 860 - KERALA HIGH COURT is against the assessee, the assessee is eligible for exemption. The CIT(A) has followed the binding decision of the Jurisdictional High Court in Lord Krishna Bank (supra). We are of the opinion that the judgment of the Kerala High Court is binding on all authorities including this Tribunal. We find that similar issue came up for consideration in the case of Kannur Co-operative Bank Ltd. 2014 (6) TMI 930 - ITAT COCHIN wherein the Tribunal decided the issue against the assessee.

Summary

Issues Involved:
1. Disallowance of deduction under Section 80P of the Income Tax Act.
2. Disallowance under Section 40(a)(ia) of the Income Tax Act.
3. Disallowance under Section 36(1)(viia) of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Disallowance of Deduction under Section 80P:
The primary issue in I.T.A. Nos. 328 & 329/Coch/2012 and related appeals was the disallowance of deduction under Section 80P by invoking Section 80A(5). The assessee, a cooperative bank, failed to file returns within the stipulated time under Sections 139(1) or 139(4) and did not comply with the notice under Section 142(1). As a result, the Assessing Officer initiated best judgment assessment under Section 144 and disallowed the deduction under Section 80P.

The CIT(A) upheld the disallowance, relying on a similar case (Karivellur Service Co-operative Bank Ltd.). The Tribunal referred to the case of Kadachira Service Co-op Bank Ltd. vs. ITO, emphasizing that the timely filing of returns is mandatory for claiming deductions under Section 80P, as per Section 80A(5). The Tribunal concluded that returns filed beyond the time limits specified in Sections 139(1), 139(4), or notices under Sections 142(1) or 148 cannot be considered valid for claiming deductions under Section 80P. The Tribunal dismissed the appeals, affirming the disallowance.

2. Disallowance under Section 40(a)(ia):
In I.T.A. Nos. 328 & 329/Coch/2014 and 498/Coch/2014, the issue was the disallowance under Section 40(a)(ia) for amounts not paid by the end of the accounting year. The assessee argued that Section 40(a)(i) applies only to amounts remaining unpaid at the year-end. The CIT(A) followed the Tribunal's earlier decisions, including Karivelloor Service Cooperative Bank Ltd. vs. ITO and Smt. Prasanna Radhakrishnan Dawson vs. ITO, rejecting the applicability of the Special Bench decision in Merilyn Shipping & Transports. The Tribunal, following the Gujarat High Court's judgment in CIT vs. Sikandarkhan N Tunvar, held that Section 40(a)(ia) applies to both paid and unpaid amounts. The Tribunal dismissed the appeals, confirming the disallowance.

3. Disallowance under Section 36(1)(viia):
In I.T.A. Nos. 328 & 329/Coch/2014, the issue was the disallowance under Section 36(1)(viia). The assessee contended that despite the jurisdictional High Court's judgment in Lord Krishna Bank Ltd. vs. CIT, they were eligible for exemption. The CIT(A) followed the High Court's binding decision. The Tribunal, citing its earlier decision in Kannur Co-operative Bank Ltd., upheld the disallowance, affirming the CIT(A)'s order.

Conclusion:
The Tribunal dismissed all the appeals and related stay petitions, affirming the disallowances made by the lower authorities. The judgment emphasized the mandatory nature of filing returns within specified time limits for claiming deductions under Section 80P and the applicability of Section 40(a)(ia) to both paid and unpaid amounts.