2023 (11) TMI 332 - AT - Income Tax

Deduction u/s 80P(2) - claim denied as the activities of the appellant also include micro insurance premium, NPS contribution, loan insurance premium etc. - Assessee argued that AO has disallowed the receipt instead of the income earned by the assessee on the said amount - HELD THAT - From the reading of provisions of section 80P of the Act, it is abundantly clear that if the assessee has carried out any of the activities mentioned in sub-section (2) of section 80P, then the gross total income earned from the said activity shall be an allowable deduction. In the present case, the assessee has not filed any document showing that the assessee has not claimed the deduction as indicated by the AO - AR submitted that the AO has included the total receipts from insurance business as against the income from said activity. It was contended that even perusing that that the activities of assessee are not eligible u/s 80P of the Act, then also the AO has required to disallow only the income even for the reason that the activities of the assessee does not fall within the purview of section 80P(2) of the Act. In our view, admittedly, the assessee can only claim the deduction in respect of the gross total income earned by the assessee from the activities mentioned in sub-section (2) of Section 80P of the Act. Undoubtedly, the activities of the insurance do not form a part and parcel of carrying on the business of banking and providing credit facilities to its members. In our considered opinion, the activities of the insurance do not fall within the realm of the banking activities as banking activities are separate and distinct from the insurance activities. The banking activities are regulated by the Banking Regulations Act, 1949 and the insurance activities are governed by the Insurance Regulation of Development Authority Act, 1999. The banking and insurance activities are two separate and distinct activities, governed by two different Acts and hence, it cannot be presumed that insurance activities were subsumed in banking activities. The banking activities are quite different than the insurance activities and therefore, the contention of the assessee that the activities carried out by the assessee, being the insurance activities, would fall within the banking activities is devoid of merit and we do not agree with the said contention. Activities of the assessee are primarily in the nature of insurance activities as mentioned by the Assessing Officer and confirmed by the ld.CIT(A). In view of the above, we do not find any reason to state that the assessee is entitled to any deduction under section 80P(1) of the Act. Having held that in our opinion, the AO is only entitled to disallow the deduction claimed by the assessee in the return of income with respect to insurance business. For the above said purposes, we deem it proper to remand back the matter to the file of Assessing Officer for the limited purpose with a direction to disallow the deduction claimed by the assessee in return of income which is directly relatable to the insurance activities, as it do not fall under section 80P(2) of the Act i.e., Insurance activities. We remand back the matter to the file of AO for the limited purposes of verifying the deduction claimed in return of income and to pass a fresh order - Appeal of the assessee is allowed for statistical purpose

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction under section 80P(2) of the Income Tax Act, 1961.

Condonation of Delay:
The appeal filed by the assessee was barred by a delay of 581 days. The assessee requested the bench to condone the delay, citing the lockdown imposed by the central government due to Covid-19 as the reason. The Tribunal relied on the case laws of Collector Land Acquisition Vs. Mst. Katiji & Ors and University of Delhi Vs. Union of India, holding that the delay, supported by cogent reasons, deserved to be condoned to ensure substantial justice. Consequently, the delay was condoned, and the case was taken up for adjudication on merits.

Eligibility for Deduction under Section 80P(2):
The assessee, a Co-operative Society providing credit facilities to its members, claimed a deduction of Rs. 38,22,781/- under section 80P of the Act. The Assessing Officer disallowed the deduction, stating that the income was from business activities not covered under section 80P, such as micro insurance premiums, NPS contributions, and loan insurance premiums. The Commissioner of Income Tax (Appeals), NFAC, Delhi upheld the Assessing Officer's decision, noting that the majority of the assessee's receipts were from insurance-related activities and commissions, which do not fall under the purview of section 80P.

Tribunal's Decision:
The Tribunal examined the provisions of section 80P and concluded that the activities of the assessee, primarily in the nature of insurance, do not qualify for deduction under section 80P(2). The Tribunal held that banking and insurance activities are distinct and governed by different Acts, and thus, insurance activities cannot be presumed to be part of banking activities. However, the Tribunal remanded the matter back to the Assessing Officer to disallow the deduction claimed in the return of income specifically related to insurance activities. The Assessing Officer was directed to verify the deduction claimed and pass a fresh order after providing an opportunity of hearing to the assessee. The appeal was allowed for statistical purposes.

Conclusion:
The appeal was allowed for statistical purposes, with the matter remanded back to the Assessing Officer for limited verification and fresh adjudication regarding the deduction claimed under section 80P related to insurance activities. The order was pronounced in the Open Court on 17th October, 2023.