2014 (12) TMI 1262 - AT - Income Tax

Addition u/s 80P(2)(a)(i) - Revenue submits that the lower appellate authority ought not to have granted the impugned deduction qua jewel loans facility availed by the aforesaid associate members - Held that - We find from the assessee s regulations that these jewel loans come in the array of its byelaws. The Deputy Registrar of Co-operative Societies, Udhagamandalam has also approved the same on 11.7.1994. Therefore, we observe that this activity is as per its byelaws. The Revenue s next argument that it ought not to have allowed this facilities to the associate members not having voting and other rights for section 80P deduction stands rejected by a co-ordinate bench of the tribunal in case of M/s SL(SPL) 151, Karkudalpatty Primary Agricultural Co-operative Credit Society Ltd 2014 (5) TMI 556 - ITAT CHENNAI . It stands held that allowing associate members to avail these facilities does not disentitle a co-operative society from availing section 80P deduction. The relevant provisions of the State Co-operative law have also been discussed therein. The Revenue fails to draw any distinction on facts. Thus, we affirm the CIT(A) s findings. - Decided against revenue

Summary

Issues involved:
1. Deduction under section 80P(2)(a)(i) for jewel loans provided by a cooperative society to its members and associate members.

Analysis:

Issue 1: Deduction under section 80P(2)(a)(i) for jewel loans
The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) allowing the deduction claimed by a cooperative society under section 80P(2)(a)(i) of the Income-tax Act, 1961 for jewel loans provided to its members and associate members. The Assessing Officer disallowed the deduction, stating that the activity did not qualify as providing credit facility to members and resembled banking activity. However, the CIT(A) accepted the deduction claim, emphasizing that the cooperative society was engaged in providing credit facilities to its members. The Tribunal upheld the CIT(A)'s decision, noting that the activity of providing jewel loans was in accordance with the society's byelaws and approved by the Deputy Registrar of Co-operative Societies. The Tribunal also cited a previous case where allowing associate members to avail such facilities did not affect the society's eligibility for section 80P deduction. Consequently, the Tribunal rejected the Revenue's appeal and affirmed the CIT(A)'s findings, leading to the dismissal of the Revenue's appeal.

This judgment clarifies the eligibility of a cooperative society to claim a deduction under section 80P(2)(a)(i) for providing credit facilities, including jewel loans, to its members and associate members. It highlights the importance of adherence to byelaws and regulatory approvals in determining the eligibility for such deductions. The decision provides guidance on interpreting the provisions of the State Co-operative law in relation to deductions under the Income-tax Act, ensuring consistency in the application of tax laws to cooperative societies engaging in credit activities.