2013 (8) TMI 949 - AT - Income Tax

Deduction u/s. 80P(2)(a)(i) eligibility - Held that - Sub-sec. (4) of Sec. 80P has withdrawn the deduction to the cooperative bank other than primary agricultural credit society or a primary co-operative agricultural and rural development bank w.e.f. the A.Y. 2007-08. The said provision is applicable to the Aurangabad District Central Co-operative Bank (ADCCB) in which the assessee society has kept deposit. The withdrawal of deduction by insertion of Sub-section (4) of Sec. 80P does not change status of Aurangabad District Central Co-operative Bank as a co-operative society which is contemplated in Sec. 80P(1) of the Act. We therefore hold that the interest received on the deposit with the Aurangabad District Central Cooperative Bank by the assessee on the deposits are squarely covered u/s. 80P(1)(d) and the interest received on deposit kept with the Aurangabad District Central Co-operative Bank is an allowable deduction. - Decided against revenue

Summary

Issues:
1. Eligibility of the assessee for claiming deduction u/s. 80P(2)(a)(i) for income earned from 'business and profession' and not from 'income from other source'.
2. Eligibility of the assessee for deduction u/s. 80P(2)(d) even though it was not claimed in the return of income.

Analysis:

Issue 1:
The appeal was filed by the revenue against the order of the Ld. CIT(A), Aurangabad, challenging the eligibility of the assessee for claiming a deduction u/s. 80P(2)(a)(i) of the Act. The Assessing Officer disallowed an amount received as interest from a cooperative bank, citing a Supreme Court decision. The Ld. CIT(A) accepted the plea of the assessee, distinguishing the case cited by the Assessing Officer. The Ld. CIT(A) held that the activity of the assessee credit society is akin to banking activities, making the assessee eligible for the deduction u/s. 80P(2)(i) of the Act. However, the interest received from the cooperative bank was not considered as income derived from providing credit facilities to members. The Tribunal confirmed the order of the Ld. CIT(A) on this issue.

Issue 2:
Regarding the eligibility for deduction u/s. 80P(2)(d), the Tribunal analyzed the relevant provisions of the Act. It was noted that sub-section (4) of Sec. 80P had withdrawn the deduction for certain cooperative banks from A.Y. 2007-08. However, this withdrawal did not change the cooperative status of the bank in question. The Tribunal held that the interest received on deposits with the cooperative bank falls under u/s. 80P(1)(d) and is an allowable deduction. While the Tribunal disagreed with the Ld. CIT(A) on the application of Sec. 80P(2)(a)(i), it upheld the relief granted to the assessee u/s. 80P(2)(d). Consequently, the revenue's appeal was dismissed by the Tribunal.

This judgment clarifies the interpretation and application of provisions related to deductions for cooperative societies under the Income Tax Act. The Tribunal's analysis focused on the specific language of the law and relevant precedents to determine the eligibility of the assessee for deductions under different sections.