2016 (12) TMI 402 - AT - Income Tax

Disallowance of deduction u/s.80P(2)(e) - Held that - From going through the order of ld. CIT(A) we find that he has agreed to the contentions of assessee for being eligible to claim deduction u/s 80P(2)(e) but while deciding the quantum of appeal it seems that he has not adjudicated the issue in the right perspective because in his appellate order he has mentioned that appellant has not raised ground and submitted the explanation or detail in respect of other part i.e. if there is no net profit or gain i.e. positive income before allowance u/s.80P of the Act, then no such deduction u/s.80P(2)(e) of the Act can be allowed, It is therefore the ground raised is not specific against this contention of A.O., but from submission it is held that the same is only for one contention which is hereby allowed while for other contention the A.O. has not raised ground so disallowance for such contention by A.O. is upheld. This ground is treated as partly allowed. The above observation of ld. CIT(A) is erroneous to the extent that assessee is having positive income from letting out godowns/warehouses at ₹ 11,40,187 and specific ground has been raised before CIT(A) against ld. Assessing Officer s action for not allowing the claim u/s 80P(2)(e) of the Act. To this extent the order of ld. CIT(A) is cryptic which needs fresh adjudication. We are, therefore, of the view that in the given facts and circumstances of the case, the issue needs to be restored back to the file of ld. CIT(A) for fresh adjudication. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Denial of deduction under Section 80P(2)(e) of the Income Tax Act, 1961.
2. Requirement of net profit or gain for claiming deduction under Section 80P(2)(e).
3. Proper consideration of submissions and explanations by lower authorities.
4. Charging of interest under Sections 234A/B/C/D of the Income Tax Act.
5. Initiation of penalty proceedings under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Denial of Deduction under Section 80P(2)(e):
The assessee, a Co-operative Society, claimed a deduction under Section 80P(2)(e) of the Income Tax Act for income earned from letting out godowns/warehouses. The Assessing Officer (AO) denied this deduction on the grounds that the income was not earned from its members. The CIT(A), however, allowed the deduction, referencing the Madras High Court's decision in the case of South Arcot Dist. Co-op. Marketing Society Ltd., which was upheld by the Supreme Court. The Tribunal observed that the CIT(A) correctly followed the precedent, allowing the deduction even if the income was from non-members.

2. Requirement of Net Profit or Gain for Deduction:
The CIT(A) partially allowed the assessee's claim but noted that no deduction under Section 80P(2)(e) could be allowed if there was no net profit or gain. The Tribunal found this observation erroneous, as the assessee had declared a positive income of ?11,40,187 from letting out godowns/warehouses, which was eligible for the deduction. The Tribunal highlighted that the CIT(A)'s decision was inconsistent and required fresh adjudication.

3. Proper Consideration of Submissions and Explanations:
The assessee argued that both the AO and CIT(A) failed to properly consider the various submissions and explanations provided. The Tribunal agreed that the CIT(A)'s order was cryptic and did not fully address the specifics of the assessee's claim. Consequently, the Tribunal remanded the issue back to the CIT(A) for a detailed and fresh adjudication, ensuring all submissions and explanations are duly considered.

4. Charging of Interest under Sections 234A/B/C/D:
The CIT(A) confirmed the AO's action of charging interest under Sections 234A/B/C/D. The Tribunal deemed this ground as consequential, implying that the outcome would depend on the final determination of the primary issues.

5. Initiation of Penalty Proceedings under Section 271(1)(c):
The CIT(A) upheld the AO's initiation of penalty proceedings under Section 271(1)(c). The Tribunal considered this ground premature, indicating that the appropriateness of penalty proceedings would be contingent on the final resolution of the substantive tax issues.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remanding the matter back to the CIT(A) for fresh adjudication on the deduction under Section 80P(2)(e), ensuring proper consideration of all relevant submissions and explanations. The Tribunal emphasized the need for a clear and consistent decision regarding the eligibility and quantum of the deduction. Other grounds were either deemed consequential or premature, pending the outcome of the primary issue. The order was pronounced on 30th November 2016.