2014 (3) TMI 1058 - AT - Income Tax

Entitlement to claim deduction u/s.80P - Held that - After comparative analysis of the co-operative banks and co-operative societies on various parameters held that the activities of both the organizations and the compliances to be made under various Acts for both the organizations are varied. The sub-section 4 to section 80P is applicable only to co-operative banks and not to credit co-operative societies. The Revenue has tried to establish that the assessee although a credit co-operative society is carrying banking business and is thus not eligible. In our opinion, the assessee is not a co-operative bank. The activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee are confined to its members only and that too in a particular geographical area. The activities of the assessee are not regulated by the RBI or the provisions of the Banking Regulation Act. - Decided in favour of assessee

Summary

Issues:
- Disallowance of deduction u/s.80P(2) for Assessment Year (AY) 2008-09.
- Interpretation of the term "co-operative bank" under section 80P(4) of the Income Tax Act, 1961.

Analysis:
1. The appeal was filed by the Revenue against the order of the Commissioner of Income Tax(Appeals)-I, Coimbatore for AY 2008-09 disallowing the deduction claimed by the assessee under section 80P(2) of the Act. The Assessing Officer treated the assessee as a co-operative bank in AY 2009-10, leading to a disallowance of the deduction claimed. Subsequently, a notice u/s.148 was issued for AY 2008-09, resulting in the disallowance of the deduction u/s.80P by the Assessing Officer in the assessment order dated 06-03-2013.

2. The CIT(Appeals) allowed the appeal of the assessee, holding them entitled to the deduction u/s.80P(2). The Revenue, aggrieved by this decision, brought a second appeal before the Tribunal. During the proceedings, it was highlighted that a co-ordinate Bench of the Tribunal had previously decided in favor of the assessee in a similar case for AY 2009-10.

3. The Tribunal analyzed the provisions of section 80P(4) and the Explanation to determine the eligibility of the assessee for the deduction. It was established that the benefit of section 80P is not available to co-operative banks, as defined under the Banking Regulation Act, 1949, but is applicable to Primary Agricultural Credit Societies. Various decisions were cited to differentiate between co-operative banks and credit co-operative societies, emphasizing that the exclusion clause of section 80P(4) does not apply to entities not classified as co-operative banks.

4. The Tribunal referred to a CBDT circular clarifying that subsection(4) of section 80P does not apply to entities not falling within the definition of a co-operative bank as per the Banking Regulation Act, 1949. The Tribunal concluded that the assessee, being a credit co-operative society and not a co-operative bank, was eligible for the deduction u/s.80P. The activities of the assessee were found to be distinct from those of a co-operative bank, and the appeal of the Revenue was dismissed based on previous Tribunal decisions and the CBDT circular.

5. The Tribunal upheld the decision of the CIT(Appeals) in favor of the assessee, dismissing the appeal of the Revenue on the grounds that the assessee, being a credit co-operative society and not a co-operative bank, was entitled to the deduction u/s.80P(2) for AY 2008-09. The judgment was pronounced on March 21, 2014, at Chennai.