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2016 (4) TMI 826 - KERALA HIGH COURT

2016 (4) TMI 826 - KERALA HIGH COURT - [2016] 384 ITR 490 - Exemption under section 80P - Denial of claim on belated filing of return by the assessee - Held that:- When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre-assessment enquiry is carried forward by issuance of notice under section 142 (1) or when notice is issued on the premise of esca .....

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nation of all such appellate remedies. Under such circumstances, the Tribunal was not justified in denying exemption under section 80P of the IT Act on the mere ground of belated filing of return by the assessee concerned. A return filed by the assessee beyond the period stipulated under section 139(1) or 139(4) or under section 142(1) or section 148 can also be accepted and acted upon provided further proceedings in relation to such assessments are pending in the statutory hierarchy of adjudica .....

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SC I.T.A. Nos. 212, 273, 278, 292, 299 & 313 of 2013, 156, 188, 189, 190, 191, 192, 193, 197, 198, 199, 201, 202, 203, 204, 205, 206, 207, 209, 211, 212, 214, 216, 217, 218, 219, 220, 221, 222, 223, 224, 225, 227, 228, 229, 230, 231, 237, 238, 239, 240, 241, 243, 247, 250, 251, 252, 253, 254, 255, 265, 266, 268, 269, 270, 271,272,273,275 & 281 of 2014 and 25, 26, 29, 30, 32, 34, 35, 37, 38, 39, 40, 41, 42, 45, 46 & 53 of 2015 JUDGMENT Thottathil B.Radhakrishnan, J . 1. These appeals .....

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ng exemption under section 80P of the IT Act. Incidental issues relating to doubtful debts proportionate to the gross total income and the status of rural branch to claim deduction referable to section 36 (1)(viia) of the IT Act are also raised. 2. Heard Snr.Adv.Firoze B.Andhyarujina and Snr.Adv.T.M.Sreedharan and other learned advocates for the appellants and Snr.Adv.P.K.R.Menon, learned senior standing counsel for the Government of India (Taxes) assisted by Adv.Jose Joseph, standing counsel fo .....

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er the Tribunal is justified in denying the exemption under section 80P of the Income Tax Act, 1961, on the mere ground of belated filing of return by the assessee? C) Whether a return filed by the assessee beyond the period stipulated under section 139(1)/(4) or section 142(1)/148 can be held as non est in law and invalid for the purpose of deciding exemption under section 80P of the Income Tax Act, 1961? D) Whether the Tribunal is correct in law or is justified in restricting the provisions fo .....

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s of law were incorporated into the other appeals as well. 5. Before proceeding further, we may note that the Income Tax Appellate Tribunal also proceeded to decide many of the fundamental issues as if they are common to all these cases. Some of the matters before the Tribunal were either bunched up and decided in one go, while the others were rendered following the earlier decisions on the same issue. 6. Of prime importance is the plea of the appellants that they are primary agricultural credit .....

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the IT Act. We will detail the relevant statutory provisions as pointed out by the learned senior counsel for the appellants as we proceed with the consideration of the issue in this regard. 7. Submissions were also made on the questions raised relating to the belated filing of returns. Some of the cases are those were returns were filed belatedly; some relate to claim of exemption after best of judgment assessments; and, yet another group relates to cases where notices were issued under sectio .....

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d claim for exemption. It is argued that the appellants are, essentially, Co-operative Banks; and, not merely primary agricultural credit societies; and hence the appellants' plea as to exemption under section 80P(4) is unfounded. 9. Section 80P of the IT Act deals with deduction in respect of income of co-operative societies. Sub- section 1 of that section provides that where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in .....

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P means that the provisions of section 80P shall not apply to a primary agricultural credit society. Hence, the levy of tax in terms of the provisions of section 80P does not apply to a primary agricultural credit society. 10.The terms 'co-operative bank' and 'primary agricultural credit society'; for the purpose of sub-section 4 of section 80P of the IT Act, shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949; for short; BR Act, go .....

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section 5(cci) of the BR Act to mean, inter alia, a primary co-operative bank. A primary co-operative bank is a co-operative society other than a primary agricultural credit society, going by clause (ccv) of section 5 of the BR Act. Therefore, a primary agricultural credit society is not to be treated as a primary co-operative bank and therefore, not to be reckoned as a co- operative Bank. We state this here and now to point out that the appellants which are primary agricultural credit societies .....

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(cciv) of the BR Act; 'primary agricultural credit society' means a co- operative society, the primary object or principal business of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities (including the marketing of crops; and the bye-laws of which do not permit admission of any other co-operative society as member. However, the provisions in sub-clause 2 of section 5(cciv) shall not apply to the admis .....

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term 'co-operative society'; reverting to section 5 (cciia) of the BR Act, it can be seen that for the purpose of that Act, 'co-operative society' means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co- operative societies, or any other Central or State law relating to co-operative societies for the time being in force. 14. In all the clauses referred to above, the legislative tool used is  .....

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ould apply. 15. Appellants in these different appeals are indisputably societies registered under the Kerala Co-operative Societies Act, 1969, for short, KCS Act and the bye-laws of each of them, as made available to this Court as part of the paper books, clearly show that they have been classified as primary agricultural credit societies by the competent authority under the provisions of that Act. The Parliament, having defined the term 'co-operative society' for the purposes of the BR .....

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relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act, it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes, the rate of interest on such loans and advances to be at the rate fixed by the Registrar of Co-operative Societies under the KCS Act and havi .....

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of the BR Act, having regard to the primary object or principal business of each of the appellants. It is also clear from the materials on record that the bye-laws of each of the appellants do not permit admission of any other co-operative society as member, except may be, in accordance with the proviso to sub-clause 2 of section 5(cciv) of the BR Act. The different orders of the Tribunal which are impeached in these appeals do not contain any finding of fact to the effect that the bye-laws of .....

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Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section 80P against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act, including the appellants are entitled to such exemption. 18. Questions B and C relate to denial of exemption on ground referable to belated filing of return, that is to say, returns filed beyond the period stipulated under section 139(1) or sect .....

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ons 142(1) and 148 of the IT Act. 19. Section 80A(5) provides that where the assessee fails to make a claim in his return of income for any deduction, inter alia, under any provision of Chapter VIA under the heading "C.-Deductions in respect of certain incomes", no deduction shall be allowed to him thereunder. Therefore, in cases where no returns have been filed for a particular assessment year, no deductions shall be allowed. This embargo in section 80A(5) would apply, though section .....

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In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible. 20. Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute a .....

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