2014 (1) TMI 1690 - HC - Income Tax

Deduction under section 80P (2) - ITAT allowed the claim - Held that - Subsection( 4) of section 80P will not apply to an assessee which is not a cooperative bank. In the case clarified by CBDT, Delhi Coop Urban Thrift & Credit Society Ltd. was under consideration. 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 Revenues contention that section 80P(4) would exclude not only the cooperative banks other than those fulfilling the description contained therein but also credit societies, which are not cooperative banks. In the present case, respondent assessee is admittedly not a credit cooperative bank but a credit cooperative society. Exclusion clause of subsection( 4) of section 80P, therefore, would not apply. - Decided against revenue

Summary

Issues:
1. Whether the assessee is entitled to claim deduction under section 80P (2)?
2. Whether the assessee is covered within the purview of Section 80P (4) of the Act?

Analysis:
1. The primary issue in this case revolves around the deduction under section 80P (2) of the Income Tax Act. The Revenue challenged the entitlement of the respondent assessee, a cooperative credit society, to claim this deduction based on an amendment in subsection (4) of Section 80P. The contention was that post-amendment, the respondent would not be eligible for the deduction. However, a previous order by the Court rejected a similar appeal by the Revenue, emphasizing that deductions under section 80P are granted to certain cooperative societies as specified in subsection (2) of the Act. The Court highlighted the specific conditions under which deductions are allowed for cooperative societies engaged in banking or providing credit facilities to members.

2. The second issue pertains to the interpretation of section 80P(4) of the Act. The Assessing Officer initially held that the respondent assessee would not qualify for the deduction under section 80P due to the provisions of section 80P(4). However, both the CIT(Appeals) and the Tribunal overturned this decision, stating that the exclusion provided in subsection (4) would not apply to the respondent as it was not a bank. The Court delved into the legislative intent behind the exclusion criteria specified in section 80P(4), particularly focusing on the definitions of cooperative bank, primary agricultural credit society, and primary cooperative agricultural and rural development bank as per the Banking Regulation Act, 1949.

3. The Court also examined a circular issued by the CBDT, which clarified the applicability of section 80P(4) to cooperative banks. The circular emphasized that if an entity does not fall within the definition of a cooperative bank as per the Banking Regulation Act, section 80P(4) would not apply to it. Based on this clarification, the Court dismissed the Revenue's contention that section 80P(4) would exclude credit societies that are not cooperative banks. The Court concluded that since the respondent was a credit cooperative society and not a credit cooperative bank, the exclusion clause of section 80P(4) did not apply, thereby upholding the Tribunal's decision to allow the deduction under section 80P(2).

In conclusion, the Court dismissed the Tax Appeal, affirming the Tribunal's decision to grant the deduction under section 80P(2) to the respondent cooperative credit society based on the specific provisions and interpretations of the Income Tax Act.