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TMI Blog2021 (3) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... verments made, the reasons stated and demonstrated by the Assessee failed to qualify the test of sufficient cause and also do not show any acceptable cause much less sufficient cause to exercise Court s discretion in its favour. Hence considering the peculiar facts and circumstances collectively, we are not inclined to admit the appeal by condoning the delay of 606 days in filing of the appeal, consequently the application for condonation of delay stands dismissed. Revision u/s 263 - Disallowance of deduction claimed u/sec. 80P(2)(d) - HELD THAT:- No hesitation to follow the decision of Hon ble Karnataka High Court rendered in the case of Pr.CIT Vs. Totagars Co-operative Sale Society [ 2017 (7) TMI 1049 - KARNATAKA HIGH COURT] wherein clearly held that the issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. The Co- operative Bank which is a species of the genus would necessarily be covered by the word Co-operative Society . Even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Bank would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that filing of the instant appeal with application for condonation of delay is an afterthought and therefore this appeal is liable to be dismissed in limine with heavy costs. 5. Heard the parties and perused the material available on record. The law is well settled by the Higher Courts that while dealing with the application for condonation of delay, the Court is to see the conduct of the party and plausible reasoning for non filing of the statutory appeal within time. The primary function of a court is to adjudicate the dispute between the parties and to advance substantial justice. The power to condone the delay in approaching the Court has been conferred upon the Courts to enable them to do substantial justice to parties by disposing of the cases on merits. 5.1. The Apex Court in Collector, Land Acquisition, Anantnag v. Mst. Katiji (1987) I LLJ 500 SC, analyzed the provisions of law qua limitation Act and held that the expression 'sufficient cause' employed by the legislature in the Limitation Act is adequately elastic to enable the Courts to apply the law in a meaningful manner which sub-serves the ends of justice-that being the life purpose for the exist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant fact. vi) It is to be kept in mind that adherence to strict proof should not affect public justice and cause public mischief because the courts are required to be vigilant so that in the ultimate eventuate there is no real failure of justice. vii) The concept of liberal approach has to encapsulate the conception of reasonableness and it cannot be allowed a totally unfettered free play. viii) There is a distinction between inordinate delay and a delay of short duration or few days, for to the former doctrine of prejudice is attracted whereas to the latter it may not be attracted. That apart, the first one warrants strict approach whereas the second calls for a liberal delineation. ix) The conduct, behaviour and attitude of a party relating to its inaction or negligence are relevant factors to be taken into consideration. It is so as the fundamental principle is that the courts are required to weigh the scale of balance of justice in respect of both parties and the said principle cannot be given a total go by in the name of liberal approach. x) If the explanation offered is concocted or the grounds urged in the application are fanciful, the courts s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... while going through the case, Mr. Subrahmanyam enquired as to whether any appeal was filed against the order passed by the Pr.CIT on which the Assessee mentioned that the Assessee has thought that the order passed u/sec. 263 of the Act was with open direction, therefore did not file the appeal. For this Mr. Subrahmanyam informed that an appeal can be filed against the order passed u/sec. 263 of the Act and on being informed of the legal position, the Assessee immediately requested Shri C. Subrahmanyam to take the matter for filing appeal before the Hon'ble ITAT, Visakhapatnam and ultimately the appeal was filed on 28/01/2020, thus causing a delay in filing the appeal by 606 days. It was further stated in the affidavit that delay is on account of reasons cited hereinabove and there was no malafide intention in not filing the appeal within due date. 5.10. We may observe that the Assessee filed the instant appeal only after receiving the order dated 20/11/2019 passed by the ld. CIT(A) against the assessment framed u/sec. 143(3) r.w.s. 263 by the ACIT, Vijayawada. In the said order, the ld. CIT(A) did not adjudicate one of the issues qua grants-in-aid of ₹ 1,51,37,000/- w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ermined the grants-in-aid to the tune of ₹ 1,51,37,000/- as revenue receipt and added to the total income of the Assessee and further disallowed the deduction of ₹ 97,88,434/- which was claimed by the Assessee u/sec. 80P(2)(d) of the Act. Against the said additions, the Assessee preferred the first appeal before the ld. CIT(A), who sustained the aforesaid additions, against which the Assessee preferred the instant appeal and raised two issues. 9. First issue relates to the treatment of grants-in-aid received from the Government as revenue receipt. The ld.CIT(A) in concluding part of its order held that the issue of the capital/ revenue character of the grants-in-aid received by the Assessee was dealt with by the Pr.CIT in the revision order wherein while concluding the revision order it was stated by the Pr.CIT that the assessment order dated 14/03/2016 is set aside for re-doing the assessment in respect of the said issue, as it was found that the assessment order is erroneous and prejudicial to the interests of the revenue. The ld.CIT(A) further observed that on careful perusal of the revision order passed by the Pr.CIT on the issue of taxability of the grants-in-ai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A). 11. We have heard both the parties and perused the material available on record. Let us to quote the relevant part of the order dated 16/03/2018 passed by the Pr.CIT u/sec. 263 of the Act :- Hence, after considering various issues as mentioned above, the submissions of the Assessee, the facts on record and the legal position as enunciated by the judiciary, the assessment order dated 14/03/2016 passed by the AO under section 143(3) of the I.T. Act, 1961 is set aside for redoing the assessment covering the above issues mentioned in the show cause letters mentioned above, as it is found that the above mentioned order is erroneous and prejudicial to the interests of the revenue on the above issues. The AO may pass the order after giving the Assessee a reasonable opportunity of being heard. A perusal of the directions part of the order passed by the Pr.CIT u/sec. 263, it reflects that the Pr.CIT set aside the original assessment order dated 14/03/2016 framed by the AO u/sec. 143(3) for redoing the assessment, covering the issues which include the issue under consideration. The Pr.CIT at the last further directed that the AO may pass the order after giving the Assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nder consideration, whereas the Ld. D.R. supported the decisions of the authorities below on the issue under consideration. 13. Heard the parties and perused the material available on record. The Assessee during the financial year under consideration had received interest of ₹ 1,81,08,430/- from the investment in fixed deposits made with the Krishna District Co-operative Central Bank, of which the Assessee is a member shareholder and after netting off the interest expenditure relating to the said interest receipt, the net interest income of ₹ 97,88,434/- was claimed as deduction u/sec. 80P(2)(d). The AO disallowed the said claim , while relying upon the decision of the Hon'ble Karnataka High Court in the case of Pr.CIT Vs. Totgars Co-operative Society (83 Taxmann.com 140) wherein it was held that the income by way of interest earned on the deposits or investments made with a Co-operative Bank is not allowable. The AO further held that surplus funds available with the Assessee, have been invested for earning interest in Co-operative Bank which is carrying the banking business governed by Banking Regulations Act, therefore, it is clear from section 80P(4) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with any other co-operative society. The AO disallowed the said deduction in the assessment order on the ground that the interest income earned from the investment made with a co-operative bank, which is governed by the provisions of the Banking Regulation Act, 1949, is not eligible for the deduction u/s. 80P(2)(d) in view of the provisions of sec. 80P(4) which lay down that the provisions of sec. 80P shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. In support of his view, the AO placed reliance on the decisions of the Hon'ble Karnataka High Court in the case of Pr.CIT Vs. Totagars Co-operative Sale Society (2017) 83 taxmann.com 140 (Kar). 26. On the other hand, it was contended by the assessee that the said decision of the Hon'ble Karnataka High Court is not applicable to the assessee's case since the assessee deposited its working capital funds only in the fixed deposits of KDCC Bank as a short term measure and the funds invested by the assessee do not represent the surplus funds of the assessee. 27. The issue arising for consideration in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing credit facility to its members continued to be governed by the ambit and scope of deduction under Section 80P of the Act. 14. The banking business, even though run by a Co-operative bank is sought to be excluded from the beneficial provisions of exemption or deduction under Section 80P of the Act. The purpose of bringing on the statute book sub-section (4) in Section 80P of the Act was to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and to exclude the normal banking business income from such exemption/deduction category. The words used in Section 80P(4) are significant. They are: 'The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society ..... . The words in relation to can include within its ambit and scope even the interest income earned by the respondent assessee, a co-operative Society from a Co-operative Bank. This exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the Act. The only exception is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards the reliance placed by the assessee on the decision of Hon'ble Delhi High Court in the case of CIT Vs. Kribhco (2012) 23 taxmann.com; decision of Hon'ble Punjab Haryana High Court in the cases of Punjab State Cooperative Milk Producers Federation Ltd. Vs. CIT (2011) 336 ITR 495 and CIT Vs. Doaba Co-operative Sugar Mills Ltd (1998) 230 ITR 774 and the decision of Hon'ble ITAT Chandigarh in the case of ITO Vs. Punjab State Co-operative Milk Producers Federation Ltd. (2010) 130 TTJ 1 in support of its eligibility for deduction u/s. 80P(2)(d), it is noticed that the said decisions were rendered for assessment years prior to A.Y. 2007-08, the assessment year from which the provisions of sec. 80P(4) have come into effect and consequently, it is held that the said decisions do not render any assistance to the case of the assessee. 13.4 The issue in hand relates to the claim of deduction u/sec. 80P(2)(d) of the Act. For clarity, the contents of section are reproduced herein below for ready reference:- Section 80P (2) of The Income- Tax Act, 1961. 80P. Deduction in respect of income of co- operative societies (1) Where, in the case of an Assessee being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bringing on the statute book sub-section (4) in Section 80P of the Act was to exclude the applicability of Section 80P of the Act altogether to any co-operative bank and to exclude the normal banking business income from such exemption / deduction category. The words used in Section 80P(4) are significant. They are: The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society ..... . The words in relation to can include within its ambit and scope even the interest income earned by the respondent-assessee, a co-operative Society from a Co-operative Bank. This exclusion by Section 80P(4) of the Act even though without any amendment in Section 80P(2)(d) of the Act is sufficient to deny the claim of the respondent assessee for deduction under Section 80P(2)(d) of the Act. The only exception is that of a primary agricultural credit society. The depository Kanara District Central Bank Limited in the present case is admittedly not such a primary agricultural credit society. 15. The amendment of Section 194A(3)(v) of the Act excluding the Co-operative Banks from the definition of Co-operative Society by Finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. 11. The learned counsel has relied on the case of The Totgars Co-operative Sale Society Ltd. Vs. Income Tax Officer, (supra). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is in-applicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case. 13.7 The Hon ble Karnataka High Court in Totgar s case (2017) 392 ITR 74 (supra) clearly held that the issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. The Co-Operative Society bank is merely a variety of the Co- Operative Societies and would be included in the words 'Co-operative Society . The Hon ble Court also distinguished the case i.e. Pr.CIT Vs. Totgars Co-op ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learly held that the issue whether a Co-operative Bank is considered to be a Co-operative Society is no longer res integra. The Co- operative Bank which is a species of the genus would necessarily be covered by the word Co-operative Society . Even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co- Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Societies'. Admittedly, the interest which the Assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co-operative Society Bank would be deductable from the gross income of the Co-operative Society in order to assess its total income. 13.14 Section 80P(2)(d) exempt the income by way of interest or dividend derived by the co-operative society from its investment with any other co-operative society which includes Co-operative bank which would be included in the words Co-operative Societies as held by the Hon ble Karnataka high Court in Totgars s case(supra). In the instant case, the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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