2019 (8) TMI 451 - AT - Income Tax

Reopening of assessment - HELD THAT - Original assessment order is totally silent whether any inquiry was conducted by the AO or not. The assessee failed to place on record questionnaire if any issued u/s 142(1) whereby it was brought to the notice of the AO that it has ceased to carry out business of banking. Assessee, though pointed out that specific questionnaire may not have been asked, but this fact was in the knowledge of the AO, because he has noticed that the bank is under liquidation. For this purpose, she brought to our notice the assessment order dated 12.9.2011. However, no details have been placed before us pointing out the fact that the AO has called for specific details and applied his mind. Therefore, the allegation against the AO that he has reopened the assessment on the basis of change of opinion is not sustainable. Revenue authorites have considered this aspect elaborately. We do not find any merit in this ground of appeal. Exemption u/s 80P(2)(a)(i) - HELD THAT - No doubt the status of the assessee as a cooperative credit society is intact. It has been prohibited to carry out the banking business. In such situation, inherently, it is entitled for exemption u/s 80P(2)(a)(i) being a cooperative credit society. But such exemption will be only on the activities confined to a cooperative credit society viz. if an assessee has earned interest income from its members, it may qualify for grant of exemption u/s 80P(2)(a)(i). If it has earned any other income from its activities as a cooperative society, for which it existed, then the income on such activity would also qualify. In the present years, the assessee has only interest income from the deposits made with nationalized bank. Such interest income does not qualify for grant of exemption u/s 80P(2)(a)(i) as held by the Hon ble jurisdictional High Court in the case of SBI Employees Co-op. Credit Supply Society Vs. CIT, 2016 (7) TMI 516 - GUJARAT HIGH COURT that it is the only interest derived from the credit provided to its members, which is deduction under section 80P(2)(a)(i), and the interest derived by depositing surplus with nationalized banks not being attributable to the business carrying on by the assessee, could not be deducted under section(2)(a). In view of the decisions of Hon ble jurisdictional High Court, we do not find any merit in this ground of appeal, but we accept alternative contention that only net interest income be excluded from the computation of 80P(2)(a)(i). Whether the assessee is entitled for carry forward of unabsorbed loss - With regard to this aspect, we find that the assessee has already discontinued its banking business in which it has suffered loss. Therefore, it is not entitled for carry forward of such business loss. The authorities have rightly rejected its claim. Income from profit on sale of locker and vault will not qualify for exemption u/s 80P(2)(a)(i) - HELD THAT - Even if this profit on sale of locker and vault is to be treated as business income under section 50 of the Act, then also nothing would change. It will not qualify for exemption under section 80P(2)(a)(i). It is to be assessed as a separate income. The assessee failed to demonstrate that it was carrying on an organized activity in the nature of business, and therefore, the Revenue authorities have rightly treated the income from other activities as income from other sources. In view of the above, we do not find any error in this order on this issue. It is upheld.

Summary

Issues involved:
1. Reopening of assessment under section 148 of the Income Tax Act, 1961 for Asstt. Year 2009-10.
2. Entitlement for exemption under section 80P(2)(a)(i) of the Act on interest income for Asstt. Years 2009-10, 2012-13, and 2014-15.
3. Carry forward of unabsorbed losses.
4. Treatment of profit on the sale of locker and vault income.

Detailed Analysis:
1. Reopening of assessment (Asstt. Year 2009-10):
The AO reopened the assessment due to the cancellation of the assessee's banking business license and liquidation status. The assessee challenged the reopening, claiming it was based on a change of opinion. The Tribunal found that the original assessment did not address the cessation of banking activities, and the AO had not conducted any specific inquiry. The Tribunal upheld the reopening as valid, dismissing the assessee's claim of a change of opinion.

2. Entitlement for exemption under section 80P(2)(a)(i) (Asstt. Years 2009-10, 2012-13, 2014-15):
The core issue was whether the assessee, a cooperative credit society, was eligible for exemption on interest income from bank deposits under section 80P(2)(a)(i). The Tribunal held that interest income from nationalized banks did not qualify for exemption under section 80P(2)(a)(i) based on a High Court decision. However, it allowed for the exclusion of net interest income from the exemption calculation, considering any related expenditure incurred by the assessee.

3. Carry forward of unabsorbed losses:
The Tribunal determined that the assessee, having discontinued its banking business and incurring losses, was not entitled to carry forward such losses. The claim for carry forward of business loss was rightfully rejected by the authorities.

4. Treatment of profit on the sale of locker and vault income:
The assessee claimed profit on the sale of locker and vault income as business income, seeking exemption under section 80P(2)(a)(i). The Tribunal held that any income beyond the scope of cooperative society activities did not qualify for exemption. It concluded that the income from such activities should be assessed separately and not as business income eligible for exemption under section 80P(2)(a)(i).

In conclusion, the Tribunal partly allowed the appeals for statistical purposes, upholding the orders on various issues related to the assessment years 2009-10, 2012-13, and 2014-15.