Challenge on Taxability of Contributions u/s 57(2A) of KCS Act Pending for 10 years: Karnataka HC Condones Delay in Filing Appeals by Karnataka State Co-operative Federation [Read Order]

In a recent judgment,the court disposed of a batch of Income Tax Appeals challenging taxability of contribution recieved under section 57 (2A) of the Kerala Cooperative Societies Act (KCS)Act, filed by the Karnataka State Co-operative Federation Ltd. by condoning the delay in filing appeals before the Income Tax Appellate Tribunal (ITAT). The court directed the Commissioner of Income Tax (Appeals) to pass orders on a remand matter pending for over ten years within a period of four months.

The appeals arose from a common order passed by the Tribunal on May 25, 2016. The appellant-assessee, a co-operative society registered under the Karnataka Co-operative Societies Act, 1959, had challenged the denial of exemption under Section 10(23C)(iiiab) ofthe Income Tax Act.

While the Tribunal had allowed the Revenue's appeal regarding the exemption, it had remitted the issue regarding the taxability of contributions received under Section 57(2A) of the Kerala Cooperative Societys Act (KCS) Act back to the CIT (Appeals) for fresh adjudication.

The assessee approached the High Court, raising substantial questions of law regarding the denial of exemption and the validity of the assessment order. Additionally, the assessee sought the condonation of delay in filing the appeals before the Tribunal, which had initially been rejected.

Senior Counsel Sri A. Shankar, appearing for the appellant, submitted that the Tribunal in subsequent years had held that contributions under Section 57(2A) were not taxable. He pointed out that despite the Tribunal's order of remand dated May 25, 2016, the CIT (Appeals) had not passed any order for more than ten years.

Per contra, the Revenue’s counsel argued that fresh claims regarding Section 57(2A) were raised for the first time before the Tribunal and that Section 57A of the KCS Act was inserted only in 2013, having no application to the present assessment years.

Justice S.G. Pandit and Justice K. V. Aravind observed that since the Tribunal had entertained the additional grounds and remitted the matter for adjudication, the delay in filing the appeals stood condoned. However, the Bench expressed strong disapproval regarding the inordinate delay in implementing the remand order.

The Court noted that though no specific limitation period is prescribed for passing an order on remand, a delay of ten years cannot be regarded as reasonable. Emphasizing that the proceedings before the CIT (Appeals) are presently conducted in a faceless environment, the Court directed that orders be passed in terms of the remand within four months from the date of production of the court's order.

Accordingly, the High Court condoned the delay, directed the expeditious disposal of the remand proceedings, and kept all contentions open for the assessee to argue the merits of the case.

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