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2014 (8) TMI 974 - AT - Income TaxAdmissibly of deduction under section 80P - as per AO the assessee which was a co-operative society carrying on banking business was not entitled to deduction under section 80P(2)(a)(i) of the Act - Held that - The provisions of section 80P(4) has got its application only to co-operative banks. Section 80P(4) does not define the word co-operative society . The existing section 80P(2)(a)(i) shall be applicable to a co-operative society carrying on credit facility to its members. This view is clarified by the Central Board of Direct Taxes vide its clarification No. 133/06/2007-TPL dated May 9 2007. Sub- section (4) of section 80P will not apply to an assessee which is not a co-operative bank. In the case clarified by the Central Board of Direct Taxes Delhi Co-op. Urban Thrift and Credit Society Ltd. was under consideration. The circular clarified that the said entity not being a cooperative bank section 80P(4) of the Act would not apply to it. In view of such clarification we cannot entertain the Revenue s contention that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies which are not co-operative banks. In the present case the respondent-assessee is admittedly not a credit co-operative bank but a credit co-operative society. Exclusion clause of sub-section (4) of section 80P therefore would not apply. See The Asst. Commissioner of Income Tax Versus M/s Bangalore Commercial Transport Credit Co-operative Society Ltd. 2011 (4) TMI 1222 - ITAT BANGALORE . The assessee is a co-operative society engaged in providing credit facilities to its members - Decided in favour of assesse.
Issues Involved:
1. Eligibility for deduction under section 80P(2)(a)(i) of the Income-tax Act post-amendment by Finance Act, 2006. 2. Classification of the assessee as a co-operative bank or a credit co-operative society. 3. Applicability of section 80P(4) to the assessee. 4. Impact of judicial precedents and CBDT Circular on the interpretation of section 80P(4). Detailed Analysis: 1. Eligibility for Deduction under Section 80P(2)(a)(i): The primary issue revolves around the eligibility of the assessee, a co-operative society providing credit facilities to its members, for deduction under section 80P(2)(a)(i) of the Income-tax Act. The assessee claimed this deduction, which was disallowed by the Assessing Officer (AO) based on the amendment introduced by the Finance Act, 2006, effective April 1, 2007. The AO interpreted that the amendment excluded co-operative banks from availing this deduction, thereby classifying the assessee as a co-operative bank rather than a credit co-operative society. 2. Classification of the Assessee: The AO classified the assessee as a co-operative bank, arguing that the nature of its activities, despite being registered as a credit co-operative society, aligned with those of a banking institution. This classification was based on the provisions of Part V of the Banking Regulation Act, 1949, which defines a co-operative bank. The AO cited sections 56(b), 56(cci), 56(ccv), and 56(ccvi) of the Banking Regulation Act to substantiate that the assessee's activities were akin to those of a banking institution. 3. Applicability of Section 80P(4): The AO's decision to disallow the deduction was upheld by the Commissioner of Income-tax (Appeals), Mysore. However, the Tribunal, referencing its decision in the case of Asst. CIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd., clarified that section 80P(4) applies only to co-operative banks and not to credit co-operative societies. The Tribunal emphasized that the legislative intent behind the amendment was to bring co-operative banks at par with commercial banks, not to exclude credit co-operative societies from the benefits of section 80P(2)(a)(i). Therefore, the assessee, being a credit co-operative society, remained eligible for the deduction. 4. Impact of Judicial Precedents and CBDT Circular: The Tribunal also considered the judgment of the Gujarat High Court in CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd., which dealt with a similar issue. The High Court held that section 80P(4) excludes only co-operative banks, not credit co-operative societies. This interpretation was further supported by the Central Board of Direct Taxes (CBDT) Circular No. 133 of 2007, dated May 9, 2007, which clarified that section 80P(4) does not apply to entities that are not co-operative banks. The Tribunal concluded that the assessee, being a credit co-operative society, was entitled to the deduction under section 80P(2)(a)(i). Conclusion: The Tribunal allowed the appeal of the assessee, holding that the assessee is entitled to the deduction under section 80P(2)(a)(i) of the Income-tax Act. The stay petition filed by the assessee was rendered infructuous and dismissed as such. The judgment underscores the distinction between co-operative banks and credit co-operative societies and affirms the latter's eligibility for tax deductions under the specified section. Pronouncement: The judgment was pronounced in the open court on August 1, 2014.
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