2012 (6) TMI 838 - AT - Income Tax

Claim of deduction u/s 80P(2)(a)(i) - Held that - The direction of the learned CIT is modified and the AO is directed to re-frame the assessment order in accordance with law ignoring the observation of the learned CIT on allowability of deduction u/s 80 P(2) (a) (i) of the Act.

Summary

Issues:
1. Claim of deduction u/s 80P (2) (a) (i) of the Act.
2. Validity of CIT's order under section 263 of the IT Act.
3. Interpretation of provisions of Section 80P (4) of the Act.
4. Comparison with ITAT Bangalore decision.
5. Modification of CIT's direction.

Analysis:
1. The judgment involves the appeal of an assessee, a co-operative society, regarding the claim of deduction u/s 80P (2) (a) (i) of the Act amounting to Rs. 77,50,897. Initially allowed by the AO in the assessment order u/s 143 (3) of the Act, the CIT deemed the AO's decision erroneous as it was not examined in light of Section 80P (4) of the Act introduced by the Finance Act, 2006. The CIT set aside the AO's order for fresh assessment, emphasizing the need for verification of the deduction claimed under Section 80P (2) (a) (i) of the Act.

2. The assessee challenged the CIT's order, presenting the ITAT Bangalore "B" Bench decision in ACIT Vs M/s. Bangalore Commercial Transport Credit Co-operative Society Ltd. The ITAT Bangalore decision favored the assessee, emphasizing that Section 80P (4) applies to cooperative banks, not credit cooperative societies. The ITAT held that the assessee, being a cooperative society, is entitled to deduction u/s 80P (2) (a) (i) of the Act, as per legislative intent. The assessee also submitted written definitions supporting its stance, highlighting the distinction between cooperative banks and credit societies.

3. During the hearing, the assessee raised concerns about the CIT's observations conflicting with the ITAT Bangalore decision. The assessee requested modification of the CIT's direction to exclude observations on the allowance of deduction u/s 80P (2) (a) (i) of the Act. The learned DR did not oppose this request, leading to the modification of the CIT's direction. Consequently, the AO was instructed to reframe the assessment order in compliance with the law, disregarding the CIT's observations on the deduction's allowability.

4. Ultimately, the appeal of the assessee was allowed, and the judgment pronounced on 20-06-2012 favored the assessee's position. The detailed analysis of the provisions, comparison with precedent decisions, and modification of the CIT's direction ensured a fair outcome for the assessee in the matter of deduction u/s 80P (2) (a) (i) of the Act.