2011 (6) TMI 911 - AT - Income Tax

Summary

Issues Involved: Validity of addition u/s. 68 of the Act and entitlement for deduction u/s. 80P of the Act.

Validity of Addition u/s. 68 of the Act:
The Revenue challenged the first appellate order questioning the validity of the action of the Ld CIT(A) in deleting the addition made u/s. 68 of the Act. The Ld CIT(A) had deleted the addition of Rs. 2,01,60,000 in A.Y. 1999-2000 and Rs. 1,06,02,000 in A.Y. 2000-01, holding that the addition made by the A.O as assessee's income from regular banking business is entitled for deduction u/s. 80P of the Act. The Ld D.R. contended that the Ld CIT(A) had not appreciated that the provision laid down u/s. 80P(2)(ai) of the Act are not applicable in the case of the assessee since lending in such society is allowed to members only. The A.O. had made the addition on account of Fixed Deposits found credited in the assessee's books, for which the assessee failed to furnish a satisfactory explanation about the nature and sources thereof. The Ld A.R. argued that the issue raised was covered by previous decisions of the Tribunal, indicating that the society is eligible for claiming deduction u/s. 80P of the I.T. Act. The Tribunal upheld the decision of the Ld CIT(A) in favor of the assessee, finding no infirmity in the first appellate order in this regard.

Entitlement for Deduction u/s. 80P of the Act:
The Tribunal referred to a previous decision of the Pune Bench regarding the applicability of section 80P(2)(a)(i) and the definition of a Member of a co-operative society. It was noted that the society in question had given loans only to its members, satisfying the conditions laid down u/s 80P(2)(a)(1) of the Act, making it entitled to deduction u/s. 80P. The Tribunal further held that violation of bye-laws by the assessee did not automatically disqualify it as a co-operative society, as registration by the registrar of Co-op. Societies was still in place. The Tribunal concluded that the assessee society would continue to enjoy the status of a Co-operative Society and, therefore, deduction u/s 80P would be available to the assessee. Consequently, the appeals were dismissed, upholding the decision in favor of the assessee.