National Bank for Agriculture and Rural Development v. Addl. CIT, Range-3(2), Mumbai
[Citation -2019-LL-0830-135]

Citation 2019-LL-0830-135
Appellant Name National Bank for Agriculture and Rural Development
Respondent Name Addl. CIT, Range-3(2), Mumbai
Court ITAT-Mumbai
Relevant Act Income-tax
Date of Order 30/08/2019
Assessment Year 2002-03
Judgment View Judgment
Keyword Tags delay in filing appeal • condonation of delay • interest of justice
Bot Summary: As regards the decision of our co-ordinate bench in the case of Kunal Surana relied upon by the learned DR, we find that the said case is distinguishable on facts in as much as in the said case, it has been observed by our co-ordinate bench that the delay in filing the appeal by the assessee was on account of gross negligence, inaction and laches on the part of the assessee and his representatives whereas in the present case, the circumstances do not show any gross negligence on the part of the assessee. Coming to the sole Ground of appeal of the assessee that the CIT(A) erred in upholding the action of the Assessing Officer of taxing the income of the assessee for the year under consideration, the learned Representative for the assessee took us through Section 55 of the NABARD Act, 1981 which stands omitted w.e.f. 1.4.2002. In view of the above, we are of the view that if any income is derived by the assessee during the period when the provisions of section 37 were in existence on the statute book, then the assessee would not be liable to pay any income-tax in respect of such income irrespective of any provisions of the 10 11 ITA No. 5310/Mum/2010 NABARD Income-tax Act because of overriding effect of the provisions of section 37 of Exim Bank Act. Since the provisions of section 37 of Exim Bank Act were omitted from 1.4.1999, in our opinion, the assessee cannot be asked to pay the income-tax in respect of the income derived by the assessee during the period ending 31.3.1999. Further, a close reading of the above section reveals that it does not exempt the income of the assessee from the charging provisions of the Income-tax Act but only exempts the assessee from payment of such tax in respect of the income derived by the assessee during the period in which such provisions are in force. If the provisions of both the enactments are construed harmoniously, the result would be that though the income of the assessee may be chargeable to tax as per the of the provisions of the Income-tax Act, the income-tax in respect of the income derived or received by the assessee during the period ending 31.3.1999 would not be payable by the assessee. Accordingly, we allow the appeal of the assessee on the ground of applicability of Sec.55 of NABARD Act, 1981 and hold that no tax is payable by the assessee under the Income Tax Act, 1961 for assessment year 2002-03.


IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B , MUMBAI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI SANDEEP GOSAIN, JUDICIAL MEMBER ITA NO. 5310/MUM/2010 A.Y 2002-03 National Bank for Agriculture Vs. Addl. CIT, Range-3(2), and Rural Development, Mumbai. (Respondent) C-24, G Block, Bandra Kurla Complex, Post Box No. 8121, Bandra (E), Mumbai 400051. PAN AAACT4020G (Appellant) Assessee by Shri S.E. Dastur, Shri Niraj Sheth, Shri K.K. Ved and Shri Ninad Patade Revenue by Shri T. Kipgen and Shri Manish Kumar Singh Date of Hearing 21/06/2019 Date of Pronouncement 30/08/2019 ORDER PER G.S. PANNU, VICE PRESIDENT captioned appeal preferred by assessee is directed against order passed by CIT(A)-III, Mumbai dated 23.03.2007, which in turn, arises out of order passed by Assessing Officer under Section 143(3) of Income Tax Act, 1961 (in short Act ) dated 20.01.2005 for previous year relevant to assessment year 2002-03. 2. In this appeal, assessee has raised following Grounds of appeal:- 2 ITA No. 5310/Mum/2010 NABARD 1:0 Re. : Erroneous taxation of income : 1:1 Commissioner of Income-tax (Appeals) has erred in upholding action of Assessing Officer of taxing income of Appellant for year under consideration. 1:2 Appellant submits that considering facts and circumstances of its case and law prevailing on subject, its income upto 31 March 2002 was not taxable under provisions of Income-tax Act, 1961 in view of non- obstante provisions of section 55 of National Bank for Agriculture and Rural Development Act, 1981 and Commissioner of Income-tax (Appeals) ought to have held as such. 1:3 Appellant submits that Assessment Order bringing its income for year to tax be struck down as bad in law. 3. Briefly put, relevant facts are that assessee was established by NABARD Act, 1981 for providing credit towards promotion of agriculture, small scale industries, cottage and village industries, handicrafts, other rural crafts and other allied economic activities in rural areas with view to promoting integrated rural development and securing prosperity of rural areas. It filed return of income for assessment year 2002-03 on 31.10.2002 declaring total income at Rs. 103216.03 lakhs, but in course of assessment, contention of assessee was that omission of Section 55 of NABARD Act, 1981 was with effect from 1st April 2002; thus, provisions of Section 55 of NABARD Act, 1981 (under which income of NABARD was exempted from income tax) continued to be in force and applicable till 31st March 2002. In other words, as per assessee, omission of Section 55 of NABARD Act, 1981 being with effect from 1st April 2002, income of NABARD earned upto 31st March, 2002 continued to be exempt from payment of income tax in instant assessment year and only income earned by Bank from 1st April 2 3 ITA No. 5310/Mum/2010 NABARD 2002 can be subject to income tax. However, Assessing Officer did not accept contentions of assessee. According to him, law applicable to assessment is law as it stands in year of assessment and not during year in which income was earned. Since amendment to NABARD Act, 1981 was made effective from 1.4.2002, it would be applicable to appellant for assessment year 2002-03. Therefore, according to him, income of appellant for assessment year 2002-03 would be taxable under Income tax Act, 1961. 4. Aggrieved by same, assessee preferred appeal before CIT(A) wherein action of Assessing Officer has been upheld. Initially, assessee did not prefer further appeal against order of CIT(A), on being advised by then tax consultants, that it did not have good case on this ground. Subsequently, Tribunal in case of National Housing Bank vs. ACIT (ITA No. 1972/Del/2007 dated 26.02.2009), under identical facts and circumstances, held that income of National Housing Bank was liable to tax only from assessment year 2003-04 onwards. This decision relied on unreported decision of this Bench in case of Export Import Bank of India vs. JCIT, ITA No.7360/Mum/2005 order dated 18.06.2008. In this background, assessee preferred to file instant appeal before Tribunal against order of CIT(A) dated 23.03.2007 on 28.06.2010, i.e. after delay of 1064 days. assessee has also filed application seeking condonation of delay alongwith two Affidavits of Managing Director of assessee, Mr. Krishna Karmarka dated 28.05.2010 and 02.07.2010 explaining reason for delay in filing present appeal. 3 4 ITA No. 5310/Mum/2010 NABARD 5. Before us, learned Representative for assessee drew our attention to factual matrix, which we have discussed above. Thereafter, our attention was drawn to request for condonation of delay and two Affidavits of Managing Director of assessee. Affidavit dated 28.05.2010 reads as under: .. 2. THAT I am MANAGING DIRECTOR of NABARD. 3. THAT for Assessment Year 2002-03 relevant to accounting year ended on 31 March 2002 return of income was filed by NABARD in respect of its income for year ended 31 March 2002 under protest. statement showing computation of total income had following note clarifying stand of NABARD. "The National Bank for Agricultural and Rural Development contends that its income for financial year ended 31st March 2002 is not liable to Income Tax by virtue of exemption under section 55 of NABARD Act. Since section 55 of NABARD Act has been omitted with effect from 1 April 2002, exemption from taxes is available to Bank in respect of its income derived or received by it till 31 March2002.In unlikely event of Income Tax Department not accepting contention of Bank, computation of income as per provisions of Income Tax Act,1961 for financial year is given hereunder." copy of statement showing computation of total income is attached herewith- refer "Exhibit- A" 4. THAT assessment was framed on NABARD for said year in terms of Assessment Order dated 20 January 2005 passed u/s. 143(3) of Income-tax Act,1961 5. THAT said Assessment Order was appealed against by NABARD to Commissioner of Income-tax (Appeals) on various issues inter-alia raising therein aground relating to its claim of non-taxability for year in light of 4 5 ITA No. 5310/Mum/2010 NABARD section 55 of National Bank of Agriculture and Rural Development Act, 1981 6. THAT Commissioner of Income-tax (Appeals) vide his Order dated 23 March 2007 partially allowed appeal of NABARD interalia deciding aforesaid ground of appeal against NABARD. 7. That no appeal was filed by NABARD to Income Tax Appellate Tribunal against Order of Commissioner of Income-tax (Appeals) thereby not even challenging finding of Commissioner of Income-tax (Appeals) in view of fact that it was orally advised by its then tax consultants that it did not have good case on this ground. 8. THAT subsequently our attention was once again drawn to phraseology of section 55 of NABARD Act, 1981 as it stood before its deletion by 'the Finance Act, 2001' and also provisions of section 140 of 'the Finance Act, 2001' in terms of which said section 55 was deleted and it was pointed out to us that in consonance thereof income of NABARD for year ended 31 March 2002 was not liable for tax under Income- tax Act, 1961 and also to decision of Delhi bench of Income-tax Appellate Tribunal in case of National Housing Bank v/s. ACIT (ITA No. 1972/Del/2007) wherein in identical facts and circumstances Hon'ble Tribunal has held that income of National Housing Bank was liable to tax only from Assessment Year 2003-04. decision interalia relies on unreported decision of Mumbai bench of Income Tax Appellate Tribunal in case of Export Import Bank of India v/s. JCIT (ITA No. 7360/Mum/2005) From above, it can be seen that assessee chose not to file appeal before Tribunal based on oral advice of consultant that filing appeal before Tribunal will not be fruitful. Subsequently, since Tribunal decided issue in favour of assessee in another case, assessee was advised to file appeal before Tribunal. As such, delay in filing appeal was solely due to bona fide and genuine belief and that no 5 6 ITA No. 5310/Mum/2010 NABARD mala fide intentions were involved. In this regard, learned Representative placed reliance on following decisions wherein delay in filing appeal before Tribunal due to subsequent decision of Tribunal / High Court / Apex Court was condoned:- a) Magnum Exports vs. ACIT, ITA No. 1111/Kol/2012; b) My Favourite Lady Exports Pvt. Ltd. vs. ITO, ITA No. 5152/Mum/2014; c) Pahilajal Jaikishan vs. JCIT, ITA No. 1392/Mum/2012; d) Surajmal Exports vs. ACIT, ITA No. 410/Kol/2013; and, e) Nulux Engineers vs. Addl. CIT, ITA No. 2309/Mum/2012 & ITA No.7341/Mum/2014. In light of above decisions, learned Representative for assessee requested to condone delay in filing appeal. 6. Per Contra, learned DR objected to condonation of delay and relied on decision of our co-ordinate bench in case of Kunal Surana vs. ITO in ITA No. 3297/Mum/2012 wherein Tribunal rejected condonation of delay of four months in filing appeal before CIT(A). 7. We have carefully considered rival submissions and pursued material on record. At outset, we find that undisputedly there is delay of 1064 days in filing of appeal before us. So, firstly we shall deal with assessee s request for condonation of delay in filing appeal. As discussed in earlier part of order, delay in filing appeal before us was solely on ground that CIT(A) has decided issue against assessee; and, as such, based on advice of consultant, assessee did not prefer further appeal before Tribunal. On subsequent favorable decisions of Tribunal 6 7 ITA No. 5310/Mum/2010 NABARD in cases of National Housing Bank vs ACIT (supra) as well as Export Import Bank of India vs. JCIT (supra), assessee was advised to file appeal before Tribunal, and accordingly assessee filed appeal before us after delay of 1064 days. learned Representative relied on various decision of Tribunal to hold that delay in filing appeal due to subsequent decisions of ITAT/High Court is valid ground for condonation of delay and on this ground various Tribunal have condoned delay. Notably, factual matrix explained by assessee due to which there was delay in filing appeal has not been controverted. We shall thus now examine whether reason cited by assessee is good ground for delay in filing appeal and whether delay in filing appeal before us is condonable. 8. In case of Magnum Exports (supra), relied upon by learned Representative for assessee, Kolkata Bench of Tribunal condoned delay of 2017 days in filing appeal before it. In that case also, assessee filed delayed appeal due to subsequent decision of Hon'ble Supreme Court. Since facts of present case and facts in case of decision of Kolkata Bench of Tribunal in case of Magnum Exports (supra) and in decision of our co-ordinate bench in case of Pahilajrai Jaikishin (supra) are quite similar, following said decisions we hereby in interest of justice condone delay of 1064 days in filing appeal and admit appeal of assessee. Moreover, at no stage of proceedings, bona fides of reason advanced by assessee has been assailed or doubted by Revenue. It is also noteworthy that it is not length of delay but quality and bona fides of reasons for delay, which are of paramount importance while considering application seeking condonation of delay. Thus, 7 8 ITA No. 5310/Mum/2010 NABARD having regard to facts and circumstances of instant case, we have deemed it fit to condone delay. 9. As regards decision of our co-ordinate bench in case of Kunal Surana (supra) relied upon by learned DR, we find that said case is distinguishable on facts in as much as in said case, it has been observed by our co-ordinate bench that delay in filing appeal by assessee was on account of gross negligence, inaction and laches on part of assessee and his representatives whereas in present case, circumstances do not show any gross negligence on part of assessee. As such, decision relied on by learned DR is of no relevance in present case. 10. Coming to sole Ground of appeal of assessee that CIT(A) erred in upholding action of Assessing Officer of taxing income of assessee for year under consideration, learned Representative for assessee took us through Section 55 of NABARD Act, 1981 which stands omitted w.e.f. 1.4.2002. He submitted that assessee is incorporated as per specific legislation enacted by Parliament and assessee has been given full exemption from income-tax by virtue of Section 55 which was omitted w.e.f. 1.4.2002. learned Representative submitted that identical issue has been considered by our co-ordinate bench in case of M/s. Export Import Bank of India (supra). Though said decision is rendered in context of Sec.37 of Export Import Bank of India, 1981, he submitted that Sec. 37 of Export Import Bank of India, 1981 was pari materia with Sec. 55 of NABARD Act, 1981; and, as per principles laid down in case of Export Import Bank of India (supra), assessee's income cannot be 8 9 ITA No. 5310/Mum/2010 NABARD brought to tax under Income-tax Act, 1961. We have also heard learned DR, who has reiterated reasoning taken by Assessing Officer, which we have already noted in earlier part of this order, and same is not being repeated for sake of brevity. 11. Sec.55 of NABARD Act, 1981, before its omission w.e.f. 1.4.2002, read as under:- 55. Notwithstanding anything contained in Income-tax Act,1961 or Companies (Profits) Surtax Act, 1964, or any other enactment for time being in force relating to tax on income, profits or gains, National Bank shall not be liable to pay income-tax, surtax or any other tax in respect of any income, profits or gains derived or any amount received by National Bank. 12. In case of Export Import Bank of India (supra), said corporation was also established by Act of Parliament and Section 37 of Export Import Bank of India Act, 1981 provided exemption of income from payment of various taxes including income-tax. Present Sec.55 of NABARD Act, 1981 is pari materia with Sec. 37 of Export Import Bank of India Act, 1981. In said case also, controversy arose because Sec. 37 was omitted from Export Import Bank of India Act, 1981 w.e.f. 1.4.1999. Therein assessee claimed that said omission will have effect from assessment year 2000-01 and so far as assessment year 1999-2000 was concerned, assessee was entitled for exemption of its income as provided under Section 37 of Export Import Bank of India Act, 1981. Our co-ordinate bench dealt with aforesaid aspect as under:- 8. We are also in agreement with contention of learned counsel for assessee that non obstante provisions would always override other 9 10 ITA No. 5310/Mum/2010 NABARD general provisions in case of any conflict or inconsistency between non obstante provisions and other provisions. This legal position is supported by various decisions of High Courts relied upon by counsel for assessee. Section 37 of Exim Bank Act, being non obstante provisions, would prevail over provisions of Income-tax Act. Consequently, in our opinion, so long as provisions of section 37 of Exim Bank Act remain in force, exemption from payment of income-tax cannot be denied. 9. Let us now understand impact of section 37 of Exim Bank Act which, even at cost of repetition, is being reproduced as under: "S. 37 "Notwithstanding anything contained in Income-tax Act, 1961, or Companies (Profits Surtax Act, 1964 or any other enactment for time being in force relating to tax on income, profits or gains, Exim Bank shall not be liable to pay Income-tax, surtax or any other tax in respect of (a) any income, profits or gains accruing to Export Development Fund or any amount received to credit of that Fund; and (b) any income profits or gains derived, or any amount received by Exim Bank. perusal of section shows that: 1. This is obstante provision and, therefore, in case of any conflict or inconsistency between provisions of section 37 of Exim Bank Act and provisions of Income-tax Act, provisions of section 37 of Exim Bank Act would prevail 2. Section 37 of Exim Bank Act exempts assessee from payment of income-tax, surtax or any other tax in respect of any income profits or gains derived, or any amount received by it. In view of above, we are of view that if any income is derived by assessee during period when provisions of section 37 were in existence on statute book, then assessee would not be liable to pay any income-tax in respect of such income irrespective of any provisions of 10 11 ITA No. 5310/Mum/2010 NABARD Income-tax Act because of overriding effect of provisions of section 37 of Exim Bank Act. Since provisions of section 37 of Exim Bank Act were omitted from 1.4.1999, in our opinion, assessee cannot be asked to pay income-tax in respect of income derived by assessee during period ending 31.3.1999. 10. Further, close reading of above section reveals that it does not exempt income of assessee from charging provisions of Income-tax Act but only exempts assessee from payment of such tax in respect of income derived by assessee during period in which such provisions are in force. That means that income of assessee may be computed as per provisions of Income-tax Act but income-tax payable thereon would not be payable by assessee. Therefore, assessee cannot be asked to pay income-tax payable in respect of income derived up to 31.3.1999. 11. Further, words 'derived' or 'any amount received' in above section are important. If section 37 is read independently, would mean such income derived or amount received during period in which such provisions remain in force. If contention Revenue is accepted then it would amount holding such provisions as otiose during period 1.4.1998 to 31.3.1999. In our opinion, such cannot be intention of Legislature. object and intention of Legislature was to exempt assessee from payment of income-tax on income earned during period in which such provisions remain in force 12. Therefore, if provisions of both enactments are construed harmoniously, result would be that though income of assessee may be chargeable to tax as per of provisions of Income-tax Act, income-tax in respect of income derived or received by assessee during period ending 31.3.1999 would not be payable by assessee. 13. view taken by us is fortified by decision of jurisdictional High Court in case of McDermott International Inc. us. Union of India (supra). In that case, assessee carried on its business activity onshore and offshore. In financial year 1982-83, activity of assessee was in offshore at distance about 100 nautical miles from Indian coastline. As 11 12 ITA No. 5310/Mum/2010 NABARD per provisions of Territorial Water, Continental Shelf, Exclusive Economic Zone and other Maritime Zones Act, 1976 (hereafter called as 1976 Act), limit of territorial waters was 12 nautical miles from nearest point of appropriate baseline. However, under section 6(1) of 1976 Act, limit of territorial waters was extended to 200 nautical miles from nearest baseline. By notification dated 31.3.1983, issued in exercise of powers under provisions of sections 6 and 7 of 1976 Act, Central Government extended Income-tax Act to Continental Shelf of India with effect from 1.4.1983. In view of such notification, Assessing Officer was of view that income of assessee from assessment year 1983-84 became chargeable to tax under provisions of Income-tax. assessee challenged action of Assessing Officer on ground that up to 31.3.1983, Income-tax Act was not applicable to territorial waters where business of assessee was carried on. Hon'ble Bombay High Court decided issue in favour of assessee by observing as under: "The first question which requires determination is whether by virtue of notification which came into effect from April 1, 1983, income which has accrued within area of continental shelf or economic zone, but beyond territorial waters of India, in accounting year April 1982 to March, 31, 1983, is subject to income-tax under Income-tax Act, this period is undoubtedly assessment year 1983-84 (April 1, 1983 to March 31, 1984) when Income-tax Act 1961. relevant assessment year for applicable. But, income-tax is actually levied on income which accrued during previous accounting year which is April 1, 1982 to March, 31, 1983. As territory in which income arose was beyond 12 nautical miles, Income-tax Act was not applicable to such income during this accounting year. Income-tax, therefore, cannot be levied on income which accrued during period when territory in which it accrued was not governed by Income- tax Act, 1961. Similar view has been taken by hon'ble Madras High Court in case of CIT Us. Ronald William Trikard & Others & (supra) as well as by hon'ble Allahabad High Court in case of CIT vs. E Hammet (supra). It may also be noted that similar issue also arose in case of assessee with reference to payment of income-tax for year under 12 13 ITA No. 5310/Mum/2010 NABARD consideration and Tribunal, vide order dated 14.3.2007 in I.T.A. No.52/Mum/2005, held that assessee was not liable to pay such tax for period ending 31.3. 1999. 13. In present case also, Sec. 55 of NABARD Act, 1981 has been deleted w.e.f. 1.4.2002 and hence, so far as assessment year 2002-03 is concerned, in our view, assessee's income is not liable to income-tax as per provisions of Income-tax Act, 1961. Accordingly, we allow appeal of assessee on ground of applicability of Sec.55 of NABARD Act, 1981 and hold that no tax is payable by assessee under Income Tax Act, 1961 for assessment year 2002-03. 14. In result, appeal of assessee is allowed, as above. Order pronounced in open court on 30th August, 2019. Sd/- Sd/- (SANDEEP GOSAIN) (G.S. PANNU) JUDICIAL MEMBER VICE PRESIDENT Mumbai, Date 30th August, 2019 *SSL* Copy to 1) Appellant 2) Respondent 3) CIT(A) concerned 4) CIT concerned 5) D.R, B Bench, Mumbai 6) Guard file By Order Dy./Asstt. Registrar I.T.A.T, Mumbai 13 National Bank for Agriculture and Rural Development v. Addl. CIT, Range-3(2), Mumbai
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