2013 (1) TMI 571 - HC - Income Tax

Deduction u/s 80-P (2) (a) (i) - interest received from non-members - revenue contested against Tribunal in allowing the deduction as clause 41 of the bye laws of the society clearly mentioned that loans and advances be given to women members only - Held that - As decided in CIT, Muzaffarnagar Versus Muzaffarnagar District Co-Operative Bank Ltd. 2012 (12) TMI 493 - ALLAHABAD HIGH COURT & Commissioner Of Income Tax, Ghaziabad Vs. M/s Ghaziabad Zila Sahkari Bank, Ghaziabad 2013 (1) TMI 553 - ALLAHABAD HIGH COURT & 2013 (1) TMI 552 - ALLAHABAD HIGH COURT that the income arising out of banking activities by Cooperative Bank is exempted under Section 80P (2) (a) (i) - in favour of assessee.

Summary

Issues:
1. Deduction u/s 80-P (2) (a) (i) for interest from non-members.
2. Interpretation of bye laws for loans and advances to women members.

Analysis:
1. The appeal involved a challenge under Section 260 (A) of the Income Tax Act, 1961 against an order passed by the Income Tax Appellate Tribunal. The main issue was whether the Tribunal was correct in allowing a deduction u/s 80-P (2) (a) (i) for interest received from non-members, despite the bye laws of the society specifying loans and advances to be given to women members only. The respondent, a Co-operative Society running a Co-operative Bank, had claimed exemption under Section 80P for its income from banking business. The Assessing Officer assessed a portion of the income as not part of regular banking business. However, the Commissioner of Income Tax (Appeals) granted full exemption, leading to an appeal by the Revenue Department before the Tribunal.

2. The High Court, in its analysis, referred to previous decisions related to the exemption of income from banking activities by Cooperative Banks under Section 80P (2) (a) (i) of the Act. Citing cases like The Commissioner Of Income Tax vs. M/s Muzaffarnagar District Co-operative Bank Ltd., The Commissioner Of Income Tax vs. M/s Ghaziabad Zila Sahkari Bank, and others, the Court established that income arising from banking activities by Cooperative Banks is indeed exempted under the mentioned section. The Court noted that the Tribunal's order did not have any legal flaws and upheld the exemption under Section 80P (2) (a) (i) for the interest earned by the respondent-assessee.

3. The Court, after hearing the arguments from the Revenue's counsel, concluded that the Tribunal's decision aligns with the established legal principles and precedents. By following the decisions in similar cases, the Court affirmed that the income from banking activities of the Co-operative Society was rightfully exempted under Section 80P (2) (a) (i). Consequently, the Court dismissed the appeal, ruling in favor of the respondent-assessee based on the legal provisions and previous judgments.

This detailed analysis of the judgment showcases the Court's interpretation of the Income Tax Act provisions, application of legal precedents, and the final decision regarding the deduction and exemption claimed by the respondent-assessee.