2021 (1) TMI 1277 - AT - Income Tax

Rectification of mistake u/s 254 - Deduction u/s 80-P(2)(d) - income received from investments made with Jaipur Central Co-operative Bank - whether the assessee has incurred any interest expenditure in earning the interest income? - HELD THAT - As the issue of quantum of deduction u/s 80P(2)(d) i.e whether the deduction to be allowed on gross or net interest income was under consideration by the Tribunal in each of the aforesaid three assessment years for which misc. application has been filed by the Revenue. In each of these years the Revenue has challenged the eligibility of the assessee for claim of whole of the deduction u/s 80P(2)(d) whereas the assessee in its cross appeal has challenged the action of the CIT(A) in restricting the quantum of deduction eligible for deduction u/s 80P(2)(d) of the Act. Therefore the issue raised in the misc. applications so filed by Revenue is clearly arising out of the grounds taken by the Revenue as well as the assessee before the Coordinate Benches and orders passed by the Coordinate Benches. We therefore donot see any legal infirmity in terms of raising the said issue by the Revenue before us by way of present misc. applications. For A.Y 2011-12 and A.Y 2012-13 the Coordinate Bench has held that there was no necessity to examine the issue as to whether deduction u/s 80P(2)(d) shall be allowed on the gross interest income on FDRs or it should be allowed on the net interest income as conceptually the deduction under section 80P(2)(d) has to be allowed on gross and not on net interest income as held by the Hon ble Gujarat High Court in case of Surat Vankar Sahakari Sangh Ltd. 2016 (7) TMI 1217 - GUJARAT HIGH COURT The Coordinate Bench therefore following the decision of Hon ble Gujarat High Court allowed the deduction on gross interest income for respective assessment years. For A.Y 2014-15 the Coordinate Bench followed the aforesaid decision for A.Y 2011-12 and A.Y 2012-13 allowed the deduction on gross interest income. In this year we find that the ld DR brought to the notice of Coordinate Bench the decision of Hon ble Rajasthan High Court in case of CIT vs Rajasthan Rajya Sahakari Upbhokta Sangh Ltd 1995 (1) TMI 33 - RAJASTHAN HIGH COURT and the Coordinate Bench held that it has taken into consideration the decision cited by the Revenue authorities however given that Coordinate Bench in assessee s own case has decided the matter recently for A.Y 2011-12 and A.Y 2012-13 it decided to follow the earlier decision and decided the matter in favour of the assessee. For A.Y 2016-17 the Coordinate Bench held that in the earlier decisions so rendered for A.Y 2011-12 AY 2012-13 and A.Y 2014-15 the Coordinate Benches have relied on the Hon ble Gujarat High Court decision in case of Surat Vankar Sahakari Sangh Ltd vs ACIT (supra) and the decision of the Hon ble Rajsthan High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) which has been brought to its notice by the ld. CIT DR was not considered and being the decision of the Jurisdictional High Court the same is binding on the Tribunal and therefore to this extent the decision rendered by the Co-ordinate Bench for earlier years stand distinguishable. We agree with the contention advanced by the ld AR that the legal issue challenging the validity of order passed u/s 147 was earlier dismissed as infructious for A.Y 2011-12 and A.Y 2012-13 as the matter was only decided on merits and the same should be also be recalled and decided afresh. In the entirety of facts and circumstances of the case we hereby recall the earlier orders so passed by the Coordinate Benches in 2019 (10) TMI 759 - ITAT JAIPUR and subsequent order passed by the Tribunal in 2019 (9) TMI 1338 - ITAT JAIPUR for A.Y 2014-15 for the limited purposes of adjudication of matter relating to quantum of deduction eligible for deduction u/s 80P(2)(d) as to whether the deduction should be allowed on gross interest or net interest income afresh taking into consideration the decision of the Hon ble Jurisdictional High Court in case of Rajasthan Rajya Sahkari Upbhokta Sangh Ltd (supra) as well as adjudication of following grounds of appeal afresh as raised by the assessee in its respective cross-appeals

Summary

Issues Involved:
1. Eligibility for deduction under section 80P(2)(d) of the Income Tax Act, 1961.
2. Calculation of deduction under section 80P(2)(d) on gross vs. net interest income.
3. Validity of the proceedings under section 147 of the Income Tax Act, 1961.

Issue-Wise Detailed Analysis:

1. Eligibility for Deduction under Section 80P(2)(d):

A.Y. 2011-12 & 2012-13:
- The Tribunal initially held that for the purposes of section 80P(2)(d) of the Act, Jaipur Central Cooperative Bank Ltd shall be treated as a cooperative society. Therefore, interest on FDRs placed by the assessee society with such cooperative society shall be eligible for deduction under section 80P(2)(d).

A.Y. 2014-15:
- The Tribunal followed its earlier decision for A.Y. 2011-12 and 2012-13, allowing the deduction under section 80P(2)(d) for interest received from investments with Jaipur Central Cooperative Bank.

2. Calculation of Deduction under Section 80P(2)(d) on Gross vs. Net Interest Income:

A.Y. 2011-12 & 2012-13:
- The Tribunal initially decided that the deduction under section 80P(2)(d) should be allowed on the gross interest income, following the Gujarat High Court's decision in Surat Vankar Sahakari Sangh Ltd vs ACIT.

A.Y. 2014-15:
- The Tribunal again followed its earlier decision to allow the deduction on gross interest income, despite being aware of the Rajasthan High Court decision in CIT vs. Rajasthan Rajya Sahakari Upbhokta Sangh Ltd, which mandates deduction on net interest income.

A.Y. 2016-17:
- The Tribunal reconsidered and followed the Rajasthan High Court decision, stating that the deduction under section 80P(2)(d) should be allowed only on the net receipt after deducting the expenditure incurred for earning exempt income.

Miscellaneous Applications:
- The Revenue filed miscellaneous applications arguing that the Tribunal's earlier decisions for A.Y. 2011-12, 2012-13, and 2014-15 did not consider the Rajasthan High Court's binding decision, thus constituting a mistake apparent from the record. The Tribunal agreed, noting that the earlier decisions need rectification to align with the jurisdictional High Court's ruling.

3. Validity of Proceedings under Section 147:

A.Y. 2011-12 & 2012-13:
- The Tribunal dismissed the legal grounds challenging the validity of proceedings under section 147 as infructuous because the matter was decided on merits. However, if the miscellaneous applications by the Revenue are allowed, these legal grounds should also be recalled and decided independently.

Conclusion:

The Tribunal allowed the miscellaneous applications filed by the Revenue, recalling the earlier orders for A.Y. 2011-12, 2012-13, and 2014-15 for limited purposes. The Tribunal will re-adjudicate the matter concerning the quantum of deduction under section 80P(2)(d) to determine whether it should be allowed on gross or net interest income, taking into consideration the Rajasthan High Court's decision. Additionally, the legal grounds challenging the validity of proceedings under section 147 will also be reconsidered.