Income Tax Appellate Tribunal - Amritsar
Jammu Rural Bank vs Income Tax Officer on 20 September, 2004
Equivalent citations: [2005]93ITD717(ASR), (2005)92TTJ(ASR)791
ORDER
R.S. Syal, A.M.
1. This appeal by the assessee is directed against the order passed by the CIT(A) on 25th March, 2004 in relation to the asst. yr. 2001-02.
2. The solitary effective ground projects the grievance of the assessee as under:
"(1)(i) The CIT(A) is not justified in holding that the appellant-bank was not entitled to the deduction of Rs. 58,27,925 subsequently rectified Under Section 154 by AO for Rs. 35,83,824 instead of Rs. 58,27,925 Under Section 80P of the Act on the alleged ground that any disallowance Under Section 43B is notwithstanding and therefore, cannot be subjected to deduction Under Section 80P. The CIT(A) has confirmed the action of AO by stating that if the interpretation adopted by the appellant in written submissions is accepted, the provisions of Section 43B becomes redundant, such interpretation is to be avoided while interpreting the statute. The CIT(A) is not justified in stating so, because straight deduction is available Under Section 80P (which is covered by Chapter VI-A) on the gross total income computed after all additions/disallowances.
(ii) It is prayed that the appellant-bank be allowed straight deduction Under Section 80P on gross total income determined after disallowances Under Section 43B as claimed by it rightly and correctly as per the provisions of Chapter VI-A."
3. The facts of the case lie in a narrow compass. The assessee, a regional rural bank established Under the Regional Rural Bank Act, 1961, filed its return declaring gross total income of Rs. 8.19 crores and claimed deduction Under Section 80P of the above income, During the course of assessment proceedings, it was noted by the AO that the assessee had violated the provisions of Section 36(1)(va) and Section 43B as it had not deposited the employees' contribution on account of CPF and employer's contribution to the said CPF within due dates as envisaged Under these sections. It was further noted that the assessee had claimed deduction Under Section 80P even in respect of those amounts which were not deductible. On being called upon to explain as to why deduction Under Section 80P of the Act be not withdrawn to the extent of disallowances Under the above sections, it was stated on behalf of the assessee that Section 80P was to be applied on the total income after considering the disallowances/additions. On appreciation of the provisions of Section 80P, the AO came to the conclusion that both these disallowances were the actual income of the assessee accrued by way of violation of the provisions of the Act and not earned in the normal practice of the bank and hence no deduction could have been claimed with respect to these amounts. The addition was made and the amount of deduction Under Section 80P was accordingly reduced. Not satisfied with the AO's action, the assessee went in appeal before the learned CIT(A), who observed that Section 43B superseded Section 80P and hence the addition and disallowance made by the AO was rightly not entitled to deduction Under Section 80P.
4. Before us, the learned counsel for the assessee strongly contested the finding of the first appellate authority by stating that the deduction Under Section 80P was liable to be granted on the additions and disallowances made Under Section 36(1)(va), and 43B. He referred to the decision of the Hon'ble Bombay High Court in the case of CIT v. Nagpur Zilla Krishi Audyogik Sahakaii Sangh Ltd. (1994) 209 ITR 481 (Bom) to lay stress on the point that the deduction was liable to be allowed by considering the 'business income' included in the "gross total income". Sounding a contra note, the learned Departmental Representative stated that since the assessee had failed to deposit the dues of its employees in CPF account and thus the additions made accordingly did not warrant the inclusion of the same amounts for the grant of deduction. He strongly relied on the impugned order by stating that there was no infirmity whatsoever warranting any interference.
5. We have considered the rival submissions in the light of material placed before us and precedents relied upon. The only issue raised in the present appeal is confined to the interpretation of Section 80P. There is no dispute about the fact that the assessee was entitled to deduction Under Section 80P as it was carrying on the business of banking or providing credit facilities within the meaning of Section 80P(2)(a)(i). Clause (a) of Sub-section (2) provides that in the case of a co-operative society engaged in the carrying on the business of banking or providing the credit facilities to its members, the whole of the amount of "Profits and gains of business" attributable to such activity shall be deducted. The controversy is confined to the question of interpreting meaning of the expression "the amount of profits and gains of business" as employed in this clause. It is noted that the same has not been defined in Section 80P, unlike a specific meaning having been assigned to the term "Profits of the business" in Section 80HHC and Section 80HHF vide Clause (baa) of the Explanation below Section 80HHC (4C) and Clause (f) of the Explanation below Section 80HHF (6). However, their lordships of the Hon'ble Bombay High Court in the aforenoted decision took the view that the expression "the amount of profits and gains" used in Sub-section (2) of Section 80P must mean an income as computed Under Section 29 of the Act. In the absence of any contrary decision having been brought to our notice by the learned Departmental Representative, we will proceed with the case by adopting the meaning of the said expression as taken note of in this judgment. Sec. 14 provides that all income for the purposes of charge of income-tax and computation of total income shall be classified Under the five heads starting from 'Salaries' and ending with 'Income from other sources'. Profits and gains of business or profession" Under the Chapter IV-D which comprises of Section 28 to Section 44D deals with the computation of income Under this head. Sec. 29 sets out the computation of income Under this head. It states that the income referred to in Section 28 shall be computed in accordance with the provisions contained in Sections 30 to'43D. It, therefore, becomes amply clear that the income Under the head "Profits and gains of business or profession" is one which is determined after making all deductions and disallowances, etc. that are enshrined Under Section 30 to 43D. Adverting to the facts of the present case, it is noted that both the sections viz. 36(1)(va) and 43B both fall within this Chapter and hence the disallowances are the subject-matter of computation of income Under Section 29. It is, therefore, easily deducible that, in the present context, the income determined after these two additions/disallowances is the income from "Profits and gains of business or profession". Going back to Section 80P, we find that the deduction is admissible on "the whole of the amount of profits and gains of business or profession", attributable to the charging on the banking business. That being the position, it becomes abundantly clear that the "business income" after making the abovesaid two disallowances ultimately constitutes the "Profits and gains of business" and the whole of that amount is eligible for deduction Under Section 80P.
5.1 Now we will deal with the contention put forth by the learned Departmental Representative that the learned CIT(A) had not rightly accepted the assessee's claim by holding that Section 43B contains the expression 'notwithstanding anything to the contrary contained in any other provision of this Act' and hence the provisions of Section 43B are overriding any other provisions of the Act including Section 80P. It is true that the non obstante clause is contained in this section but the same is required to be read harmoniously with the words following it. When so read the language of the sections turns out to be "notwithstanding anything contained in any other provisions of this Act, the deduction otherwise allowable Under this Act in respect of......."A bare perusal of the relevant portion of the section reveals that the non obstante clause is applicable only qua the deductions which are otherwise allowable Under the Act in respect of any sum payable by the assessee by way of tax, duty, cess, etc. or any sum payable by the assessee as an employer by way of contribution to any CPF, etc. This section is confined to the items mentioned Under Clauses (a) to (f) in this section and does not override the whole Act. The learned CIT(A) read the section partly and only considered the first line whereas the second line escaped his attention which is material for determination of the present issue. It is important to bear in mind that, while dealing with this section, the Court must try to find out the extent to which the legislature has intended to give one provision an overriding effect over another provision. The Hon'ble Supreme Court in the case of A.G. Varadarajulu and Anr. v. State of Tamil Nadu and Ors. has held that the intention of the legislature in employing the non obstante clause is to be gathered from the enacting part of the section. It held that when the section containing the said clause does not refer to any particular provision which it intends to override but refers to the provisions of the statute generally, it is not permissible to hold that it extends to whole Act and stands all alone by itself. We find that this clause contained in Section 43B is applicable only with respect to the deductions which are listed in Clauses (a) to (f) of this section. In our considered opinion, the learned CIT(A) was not justified in holding that Section 80P was subject to Section 43B and as such the amount of disallowances did not qualify for deduction Under the former deduction.
5.2 In view of the foregoing discussion, we are satisfied that the learned CIT(A) was not justified in restricting the claim of deduction Under Section 80P with reference to the disallowances made Under Section 36(1)(va) and Section 43B. By reversing the impugned order on this score, we accept the assessee's claim.
6. In the result, the appeal is allowed.