Since insurance activities did not fall under the purview of banking business, no deduction was permitted
Fact and issue of the case
This appeal is filed by the assessee feeling aggrieved by the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi dt.24.09.202 1 invoking proceedings under section 143(3) of the Income Tax Act, 1961 (in short, “the Act”).
The captioned appeal filed by the assessee is barred by limitation by 581 days. The assessee has moved a petition requesting the bench to condone the delay. In this connection, the assessee has filed an affidavit for condonation of the said delay wherein, it was, inter-alia, affirmed that due to lock down imposed by the central government as preventive measures to contain the spread of Covid- 19 form 23/03/2020, caused the impugned delay in filing the appeal belatedly. We rely on Case law Collector Land Acquisition Vs. Mst. Katiji & Ors, 1987 AIR 1353 (SC) and University of Delhi Vs. Union of India, Civil Appeal No. 9488 & 9489/2019 dated 17 December, 2019, hold that such a delay; supported by cogent reasons, deserves to be condoned so as to make way for the cause of substantial justice. We accordingly hold that impugned delay in filing this appeal is neither intentional nor deliberate but due to the circumstances beyond its control. The same stands condoned. Case is now taken up for adjudication on merits.
The grounds raised by the assessee read as under :
The order of the learned CIT (A) is erroneous both on facts and in law.
The learned CIT (A) erred in confirming the action of the Assessing Officer in rejecting the deduction u/s 80P(2) of the T. Act.
The leaned CIT (A) ought to have seen that the appellant is entitled for deduction u/s 80P of the I. T. Act and the claim for deduction of Rs.38,22, 78 1/- should have been allowed by the learned CIT (A).
The learned CIT (A) erred in holding that the appellant is not eligible for deduction u/s 80P (2) on the ground that the activities of the appellant also include micro insurance premium, NPS contribution, loan insurance premium etc.
The learned CIT (A) ought to have seen that the exemption is allowable u/s 80P and in the alternate on the principles of mutuality and the learned CIT (A) ought to have allowed the exemption in total.
The learned CIT (A) ought to have seen that it is a credit society formed for working on the co-operative principles and, therefore, is eligible for deduction.”
Observation of the court
In the present case, the assessee has not filed any document showing that the assessee has not claimed the deduction as indicated by the Assessing Officer in Paras 6 and 7 reproduced hereinabove. The ld. AR submitted that the Assessing Officer has included the total receipts from insurance business as against the income from said activity. It was contended that even perusing that that the activities of assessee are not eligible under section 80P of the Act, then also the Assessing Officer has required to disallow only the income even for the reason that the activities of the assessee does not fall within the purview of section 80P(2) of the Act.
In our view, admittedly, the assessee can only claim the deduction in respect of the gross total income earned by the assessee from the activities mentioned in sub-section (2) of Section 80P of the Act. Undoubtedly, the activities of the insurance do not form a part and parcel of carrying on the business of banking and providing credit facilities to its members. In our considered opinion, the activities of the insurance do not fall within the realm of the banking activities as banking activities are separate and distinct from the insurance activities. The banking activities are regulated by the Banking Regulations Act, 1949 and the insurance activities are governed by the Insurance Regulation of Development Authority Act, 1999. The banking and insurance activities are two separate and distinct activities, governed by two different Acts and hence, it cannot be presumed that insurance activities were subsumed in banking activities. The banking activities are quite different than the insurance activities and therefore, the contention of the assessee that the activities carried out by the assessee, being the insurance activities, would fall within the banking activities is devoid of merit and we do not agree with the said contention.
The activities of the assessee are primarily in the nature of insurance activities as mentioned by the Assessing Officer and confirmed by the ld.CIT(A). In view of the above, we do not find any reason to state that the assessee is entitled to any deduction under section 80P( 1) of the Act. Having held that in our opinion, the Assessing Officer is only entitled to disallow the deduction claimed by the assessee in the return of income with respect to insurance business. For the above said purposes, we deem it proper to remand back the matter to the file of Assessing Officer for the limited purpose with a direction to disallow the deduction claimed by the assessee in return of income which is directly relatable to the insurance activities, as it do not fall under section 80P(2) of the Act i.e., Insurance activities. Accordingly, we remand back the matter to the file of Assessing Officer for the limited purposes of verifying the deduction claimed in return of income and to pass a fresh order after affording due opportunity of hearing to the assessee in accordance with law. Further, the assessee is directed to appear before the Assessing Officer on the date of hearing fixed by the Assessing Officer and shall file all the documents / evidence in support of its case. In case, the assessee failed to file any documents in support of its case, Assessing Officer shall decide the matter in accordance with the law. Accordingly, the appeal of assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the Open Court on 17th October, 2023.
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