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TMI Blog2013 (2) TMI 208X X X X Extracts X X X X X X X X Extracts X X X X ..... certain income" has to be made in the return. If the contention of the assessee is accepted, then the person, who files the return of income and fails to make a claim of deduction in the return of income either by ignorance or otherwise may not get the benefit, but a person who has not filed the return of income may be in a better position to claim the benefit. It is settled principles of law that in order to avail benefits under the beneficial provision, the conditions provided by the legislature has to be complied with. Therefore,the mandatory provisions contained in section 139(1) r.w.s. 80A(5) it is mandatory for every cooperative society for claiming deduction u/s 80P to file the return of income and to make a claim of deduction in the return itself - against assessee. Notice ought to have been issued u/s 148 - Held that:- A bare reading of section 147, clearly shows that, the assessing officer has to believe that the income chargeable to tax has escaped assessment. Section 148(2) makes it mandatory to record reason for such belief. Therefore, the jurisdiction to issue notice u/s 147 is the belief of the assessing officer with regard to escapement of income from assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the LIC of India and the funds established by the State government and if it could not be considered as recognized fund within the meaning of section 2(38) such payment has to be allowed u/s 37(1) since it relates to the business expenditure as found by the Madras High Court in the case of C.I.T. v. Kattabomman Transport Corporation Ltd [1998 (9) TMI 2 - MADRAS HIGH COURT]. Therefore, the orders of lower authorities are set aside and the issue is remitted back to the file of the assessing officer to examine the scheme of the funds established by the LIC group gratuity fund and the funds established by the State Government in exercise of its executive powers u/s 80A of the Kerala Co-operative Societies' Act and thereafter decide the issue in accordance with law. Disallowance of bad debt u/s 36(1)(viia) - Held that:- Section 36(1)(viia) provides for deduction of bad and doubtful debt made by a scheduled bank or a non scheduled bank or a co-operative bank other than primary agricultural credit society or primary co-operative agricultural rural development bank not exceeding 7 ½% of the total income computed before making deduction under chapter VIA of the Act. In this case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not say that the return of income has to be filed within the due date for claiming deduction u/s 80P of the Act. What the section says is that the taxpayer has to make a claim in the return of income. In this case, according to the ld. representative, though belatedly, the taxpayers have filed the return of income before completion of the assessment proceedings. Therefore, the claim made in the returns of income which were filed belatedly, has to be considered by the assessing officer at the time of completion of the assessment. Referring to the provisions of section 142(2C), the ld. representative submitted that Proviso to section 142(2C) gives power to the assessing authority to extend the time limit for filing the return upto 180 days. Therefore, according to the ld. representative, the belated returns filed could also be accepted as a return filed in response to notice u/s 142(1) of the Act. According to the ld. representative, when the assessing officer was vested with powers to extend the time limit for filing the return of income, he ought to have extended the time limit in exercise of his powers as provided in Proviso to section 142(2C) of the Act. Referring to the circul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... though the taxpayer has not made any such claim in the return of income. He further submitted that the Madras High Court further observed that the taxpayer was not required to pay tax one paise more or one paise less than what is correctly and rightly due. 5. The ld. representative has also placed reliance on various judgments and submitted that the circular issued by the CBDT is binding on the revenue authorities. In this regard, the ld. representative placed reliance on various judgments wherein the circular issued by the CBDT dated 11-04-1955 was followed. 6. We heard, Shri T.M. Sreedharan, the ld. senior counsel also. Shri T.M. Sridharan, the ld. senior counsel appearing for the taxpayers in ITA No.267 268/Coch/2012 submitted that the taxpayers are co-operative societies under the Kerala Co-operative Societies' Act. For the assessment year under consideration, the assessing officer made assessments u/s 144 of the Act by estimating the assessable income at ₹ 16,67,400 ₹ 21,92,330 in ITA .Nos 267 268/coch/2012, respectively. The taxpayers claimed that the above profit was from business of cooperative society, therefore, they were eligible for exemptio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sel, the only possible and correct interpretation of section 80A(5) is that there must be a claim in case the return was filed and not that the return should be filed. According to the ld. representative, even though no return was filed, the taxpayer is entitled for deduction under section 80P of the Act. Referring to provisions of section 153 of the Act, the ld. representative submitted that section 153(1) specifies period for filing of the return of income at 21 months. Therefore, a combined reading of section 153(1) and 271(1)(c) of the Act envisages filing of return within this period. Therefore, the contention of the assessing officer that the claim of deduction u/s 80P shall be made in the return of income is not tenable. Referring to the Explanatory Notes to provisions of Finance (No.2) Act of 2009, the ld. senior counsel submitted that while amending Chapter VIA of the Income-tax Act, the legislature intended to prevent abuse of tax incentives. Referring to the copy of the Explanatory Note which was issued in circular No.5 of 2010 dated 03-06-2010 by the CBDT, the ld. senior counsel pointed out that the intention of the legislator is to prevent misuse of the provisions of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be taken to safeguard the rural economy and the rural mass. If the deduction claimed is denied for any reason, the taxpayers' co-operative societies have to close down its business and consequently the rural people will have no other way but to borrow money from money lenders on payment of higher rate of interest. Therefore, the ld. representative submitted that to protect the poor mass of the rural area sympathy has to be shown and deduction claimed has to be allowed so that the co-operative society may function and serve the needy and poor people of the rural area. 10. On the contrary, Smt. Susan George Varghese, the ld. DR submitted that admittedly all the taxpayers have not filed any return of income even after issue of notice u/s 142(1) of the Act. However, the taxpayers in ITA Nos 251, 253, 254 255/Coch/2012 have filed the returns of income in the course of assessment proceedings, but beyond the time limit provided u/s 139(4) of the Act. Other taxpayers have filed returns of income after receipt of pre-assessment notice. Since the returns filed were beyond the time limit provided in section u/s 139(1) and 139(4) as also the time limit specified in the notice issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all, on or before the due date, furnish a return of his income or the income of such other person during the previous year, in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed: Provided that a person referred to in clause (b) who is not required to furnish a return under this sub-section and residing in such area as may be specified by the Board in this behalf by notification in the Official Gazette, and who during the previous year incurs an expenditure of fifty thousand rupees or more towards consumption of electricity or at any time during the previous year fulfils any one of the following conditions, namely:- (i) Is in occupation of an immovable property exceeding a specified floor area, whether by way of ownership, tenancy or otherwise, as may be specified by the Board in this behalf; or (ii) Is the owner or the lessee of a motor vehicle other than a two-wheeled motor vehicle, whether having any detachable side car having extra wheel attached to such two-wheeled motor vehicle or not; or (iii) Omitted by the Finance Act, 2005 w.e.f. 1.4.2006 (iv) Has incurred expenditure for himself or any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be filed within the time limit prescribed u/s 139(1) or atleast within the time specified in the notice u/s 142(1). If the return was not filed by the taxpayers, then the consequential penal provisions as provided in section 276CC of the Act would follow. We find that the Apex Court in the case of Prakash Nath Khanna Anr v C.I.T. [2004] 266 ITR 1 (SC) had an occasion to consider the scope and ambit of section 276CC of the Act. After examining various judgments on the subject and the provisions of section 139(1), the Apex Court found that the time limit for filing the return of income is indicated only in sub section (1) of section 139 and not in sub section (4) of section 139. Therefore, even if the return was filed in terms of sub section (4) of section 139, that will not dilute the infraction in not furnishing the return within the time as prescribed under sub section (1) of section 139. The Apex Court further found that accepting the plea of the taxpayer that the return can be filed under sub section (4) of section 139 would mean that a person who has not filed the return within the due time as prescribed under sub section (1) and sub section (2) of section 139 would benefi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law that the court cannot read anything into a statutory provision which is plain and unambiguous. A state is an edict of the Legislature. The language employed in a statute is the determinative factor of legislature intent. The first and primary rule of construction is that the intention of the legislation must be found in the words used by the Legislature itself. The question is not what may be supposed and has been intended but what has been said. Statutes should be construed, not as theorems of Euclid . Judge Learned Hand said, but words must be construed with some imagination of the purposes which lie behind them . (see Lenigh Valley Coal Co. v. Yensavage (218 FR 547). The view was reiterated in Union of India v. Filip Tiago De Gama of Vedem Vasco De Gama, AIR 1990 SC 981 and Padma Sundara Rao v. State of Tamil Nadu [2002] 3 SCC 533; [2002] 255 ITR 147 (SC). In D.R. Venkatachalam v. Deputy Transport Commissioner [1977] 2 SCC 273 it was observed that courts must avoid the danger of a priori determination of the meaning of a provision based on their own preconceived notions of ideological structure of scheme into which the provision to be interpreted is somewhat fitted. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xceed the profit and gains of the undertaking or unit or enterprise or the business profit, as the case may be; and (iii) There shall be a claim made in the return of income. 17. The legislature, in their wisdom thought it fit that implementation of these three conditions would prevent misuse and to avoid multiple claim of deduction u/ss 10A, 10AA, 10B or 10BA or under any provisions of Chapter VIA under the head C.-Deductions in respect of certain incomes . Condition No.(iii) is also manifest in provisions of section 80A(5) of the Act. Therefore, a plain reading of the language of section 80A(4) and 80A(5) makes it clear the purpose and intent of the legislature. It does not require any further interpretation. 18. The question now arises for consideration is whether filing of return of income and making a claim therein in respect of deduction u/s 80P is mandatory or discretionary? 19. Let us now examine the other provisions of the Income-tax Act, 1961 where such a deduction is provided to appreciate the provisions of section 80A(5) of the Act. By Finance Act, 2005 with effect from 01-04-2006 a proviso was inserted in section 10A(1A) of the Act which reads as follows: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed in due time, i.e. within the time limit prescribed u/s 139(1). However, for the purpose of claiming deduction u/s 80P, in view of the language employed in section 80A(5) what is required is to make a claim in the return of income. The return may be filed either u/s 139(1) or 139(4) or in pursuance of a notice issued u/s 142(1) or 148 of the Act. In view of the absence of the words in due time in section 80A(5), this Tribunal is of the considered opinion that the return filed u/s 139(1) or 139(4) or within the time limit specified in section 142(1) or 148 can also be considered as return of income within the meaning of section 80A(5) of the Act. 21. The next question follows is when there is a failure on the part of the taxpayer to file return of income within the time limit provided u/s 139(1) or 139(4) or within the time specified in the notice u/s 142(1) or 148 but files the return of income belatedly, whether such return could be treated as return of income or not? 22. As we have already discussed, wherever it is necessary for the taxpayer to file the return of income within a specified date, the legislature has made it clear by inserting the words before the due ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legislature made it mandatory for filing the return of income within the due date prescribed in section 139(1) as far as carry forward of loss u/s 80 is concerned. While introducing section 80A(5) the legislature well aware that not only for carry forward of losses but also for deductions u/s 10A, 10B the taxpayer has to file the return of income within the time limit prescribed u/s 139(1) of the Act. In spite of that the legislature omitted to mention the words within due time in section 80A(5) of the Act. Therefore, this Tribunal is of the considered opinion that the return of income filed within the time limit provided in section 139(1) or 139(4) or time specified in the notice u/s 142(1) or 148 can be considered as return of income. However, the belated return filed beyond the time limit provided u/s 139(1) or 139(4) or time specified in notice u/s 142(1) or 148 of the Act cannot be considered as return of income for deduction u/s 80P of the Act. 23. The next question follows for consideration is when the taxpayer has not filed any return of income either u/s 139(1) or u/s 139(4) or in pursuance of notice issued u/s 142 or 148 whether the taxpayer is entitled for deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The persons, who complied with the provisions of the Income-tax Act by filing the return, however, failed to make a claim in the return either by ignorance or otherwise cannot be put in a worse position than a person who has not filed return as required u/s 139 of the Income-tax Act. The intention of the legislature in enacting section 80A(4) and 80A(5) is to avoid multiple deduction in respect of the same profit. The legislature prescribed three conditions in sections 80A(4) and 80A(5) which are as follows: (i) If a deduction in respect of any amount was allowed under section 10A, 10AA or 10B or 10BA or under provisions of Chapter VIA under the head C.-Deductions in respect of certain incomes in any assessment year, then the same deduction in respect of the same profit gains shall not be allowed under any other provisions of the Act for such assessment year; (ii) The aggregate deduction under various provisions shall not exceed the profit and gains of the undertaking or unit or enterprise or the business profit, as the case may be; and (iii) There shall be a claim made in the return of income. 24. The legislature in their wisdom thought that the above three co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income which escaped assessment. The question arises for consideration is at what point of time the income would be considered to be escaped assessment. To consider any income chargeable to tax as escaped assessment, the assessment proceedings shall have to come to an end either by order u/s 143(3) or otherwise by operation of law. In the case before us, admittedly, the taxpayer has not filed any return of income within the time limit specified u/s 139(1) or 139(4) of the Act. Moreover, no return was filed in compliance to the notice issued u/s 142(1) of the Act either. The contention of the taxpayer is that the return was filed belatedly but before completion of the assessment proceedings. In the case before us, admittedly, the notice u/s 142(1) was issued and the assessing officer directed the taxpayer to file the return of income. Since the return was not filed, the assessing officer proceeded further to assess the income u/s 144 of the Act. Therefore, when the so-called return said to be filed by the taxpayers, the assessment proceedings were already pending. When the assessment proceedings are admittedly pending on the date of filing of belated return no one could say that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be taken. We are conscious that sympathy is essential for justice. We are also conscious that sympathy cannot replace or substitute the provisions of the Act. Therefore, even though we have sympathy with the taxpayers, in view of the specific and mandatory provisions of section 139 r.w.s. 80A(5) of the Act, this Tribunal do not find any merit in the claim of the taxpayer. 30. The next issue arises for consideration in ITA Nos.251, 253 254 255/Coch/2012 is disallowance u/s 40a(ia) of the Act. 31. Shri Krishna Iyer, the ld. representative for the taxpayers submitted that the taxpayers being agricultural co-operative societies, the provisions of section 194A are not applicable. Referring to section 194A(3)(viia), the ld. representative submitted that the payment of interest in respect of deposit with a primary agricultural credit society or a primary credit society or a co-operative land mortgage bank or a co-operative land development bank are exempt from deduction u/s 194A of the Act. According to the ld. representative, the taxpayers are not banks and they are only cooperative primary agricultural societies. However, the assessing officer treated the taxpayers as co-o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iety, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative Societies Act. Therefore, the Kerala High Court found that the co-operative societies are exempt from provisions of section 194A of the Act. A similar view was taken by the Kerala High Court in the case of Income-tax Officer Anr v. Thodupuzha Urban Co-operative Bank Ltd Anr [2003] 264 ITR 236 (Ker). In this case before us also, admittedly, the taxpayers are registered under the Kerala State Co-operative Societies' Act and no approval was obtained from the RBI for carrying out the banking activities. Therefore, for all practical purposes, the taxpayers have to be treated as primary agricultural cooperative societies within the meaning of section 2(19) of the Income-tax Act. In view of the above, as found by the jurisdictional High Court, the taxpayers are exempt from deduction of tax at source u/s 194A of the Act. Accordingly, we are unable to uphold the orders of lower authorities. Hence, the orders of lower authorities are set as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner of Income-tax(A) has rightly rejected the additional evidence. Moreover, the contribution was not towards the gratuity fund for the exclusive benefit of the employees under an irrevocable trust. Therefore, the Commissioner of Income-tax(A) has rightly rejected the claim of the taxpayer. 37. We have considered the rival submissions on either side and also perused the material available on record. Section 2(38) of the Income-tax Act defines recognized provided fund. As per this provision, a provident fund which was recognized by the Chief Commissioner or Commissioner as per the rules contained in Part A of the Fourth Schedule to the Income-tax Act is considered to be a recognized provident fund. The second part of section 2(38) clearly states that when a provident fund established under a scheme framed under the Employees' Provident Funds Act, 1952, then that fund also has to be treated as recognized provident fund. We find that the Madras High Court in the case of C.I.T. v. Kattabomman Transport Corporation Ltd [2004] 268 ITR 507 (Mad) had an occasion to consider this issue elaborately. The Madras High Court found that the contribution made to the provident fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the issue is remitted back to the file of the assessing officer. The assessing officer shall examine the scheme of the funds established by the LIC group gratuity fund and the funds established by the State Government in exercise of its executive powers u/s 80A of the Kerala Co-operative Societies' Act and thereafter decide the issue in accordance with law after giving reasonable opportunity of hearing to the taxpayer. 39. The next ground of appeal in I.T.As 251, 253 254/Coch/2012 is with regard to bad debt u/s 36(1)(viia) of the Act. 40. We heard the ld. representative for the taxpayer and the ld. DR. We have also carefully gone through the provisions of section 36(1)(viia) of the Act. Section 36(1)(viia) provides for deduction of bad and doubtful debt made by a scheduled bank or a non scheduled bank or a co-operative bank other than primary agricultural credit society or primary co-operative agricultural rural development bank not exceeding 7 % of the total income computed before making deduction under chapter VIA of the Act. In this case, the specific claim of the taxpayers is that they are not bank but they are primary agricultural credit society. Therefore, obviou ..... X X X X Extracts X X X X X X X X Extracts X X X X
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