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2016 (10) TMI 1280 - AT - Income TaxDisallowance of deduction u/s 80P(4) - assessee is registered as a Cooperative Society under the Tamil Nadu Cooperative Societies Act, 1983 - HELD THAT - As decided in M/S. VEERAKERALAM PRIMARY AGRICULTURAL CO-OPERATIVE CREDIT SOCIETY 2016 (7) TMI 922 - MADRAS HIGH COURT the primary agricultural credit societies, registered as such under the KCS Act and classified so under that Act, including the appellants, are entitled to such exemption. Disallowance of provision made for bad debts - AO made disallowance of the provision made for bad debts on the ground that it was not written off in the accounts - HELD THAT - From the above provisions of section 36(1)(vii) of the Act, it is very clear that the bad debt is allowable only if it is written off as irrecoverable in the books of the assessee. Therefore, the disallowance made by the Assessing Officer was rightly confirmed by the ld. CIT(A) and we find no reason to interfere with the above findings of the ld. CIT(A). Thus, the ground raised by the assessee is dismissed Reopening of assessment u/s 147 - HELD THAT - CIT(A) has not adjudicated this legal issue of reopening of assessment and proceeded to decide the disallowance made under section 80P(4) of the Act. Under these facts and circumstances, we set aside the order passed by the CIT(A) and remit the matter back to the file of the ld. CIT(A) to decide the legal issue after giving sufficient opportunities of hearing to the assessee.
Issues Involved:
1. Disallowance of the claim of deduction under section 80P(4) of the Income Tax Act, 1961. 2. Addition of interest on closing stock. 3. Disallowance of amounts related to the claim of bad debts. 4. Disallowance of provision for bonus and ex-gratia, as well as the provision for gratuity. 5. Validity of the reassessment order under section 147 of the Act. Issue-wise Detailed Analysis: 1. Disallowance of the claim of deduction under section 80P(4) of the Income Tax Act, 1961: The assessee, a cooperative society, claimed a deduction under section 80P(4) of the Act, which was disallowed by the Assessing Officer on the grounds that the society was a cooperative bank. The CIT(A) upheld this disallowance. The Tribunal, however, relied on the decision of the Hon'ble Jurisdictional High Court in the case of CIT v. M/s. Veerakeralam Primary Agricultural Cooperative Credit Society, which clarified that a primary agricultural credit society is not a cooperative bank and is eligible for deduction under section 80P(4). The Tribunal deleted the disallowance, allowing the assessee's ground. 2. Addition of interest on closing stock: The assessee initially raised this ground but later chose not to press it during the hearing. Consequently, the Tribunal dismissed this ground as not pressed. 3. Disallowance of amounts related to the claim of bad debts: The assessee claimed a provision for bad debts amounting to ?79,85,573/-, which was disallowed by the Assessing Officer as it was not written off in the accounts. The CIT(A) confirmed this disallowance, noting that the provision for bad debts is allowable under section 36(1)(vii) only if written off as irrecoverable in the books. The Tribunal upheld the CIT(A)'s decision, dismissing the assessee's ground. 4. Disallowance of provision for bonus and ex-gratia, as well as the provision for gratuity: For the assessment year 2007-08, the CIT(A) sustained the disallowance of provisions for bonus, ex-gratia, and gratuity. The Tribunal noted that the CIT(A) had not adjudicated on the legal issue of reopening the assessment. Consequently, the Tribunal set aside the order of the CIT(A) and remitted the matter back for fresh adjudication, directing the CIT(A) to decide on the legal issue and other related issues afresh. 5. Validity of the reassessment order under section 147 of the Act: The reassessment for the assessment year 2007-08 was challenged on the grounds of being out of time and without jurisdiction. The Tribunal observed that the CIT(A) did not address the legal issue of reopening the assessment. Therefore, the Tribunal remitted the matter back to the CIT(A) to decide on the legal issue of reopening the assessment and other related issues, directing the CIT(A) to provide sufficient opportunities for hearing to the assessee. Conclusion: The Tribunal allowed the appeal for the assessment year 2008-09 partly, deleting the disallowance under section 80P(4) and upholding the disallowance of bad debts. For the assessment year 2007-08, the Tribunal remitted the matter back to the CIT(A) for fresh adjudication on the legal issue of reopening the assessment and other related issues, allowing the appeal for statistical purposes.
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