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2014 (7) TMI 1057 - AT - Income TaxAllowability of deduction u/s 80P Held that - As per CBDT Circular No. 133 of 2007 dated 9.5.2007 - Sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank - If the intention of the legislature was not to grant deduction to cooperative societies carrying on the business of providing credit facilities to its members, then this section would have been deleted relying upon CIT Vs. Jafari Momin Vikas Cooperative Credit Society Ltd 2014 (2) TMI 28 - GUJARAT HIGH COURT the CIT(A) is justified in directing the AO to allow the deduction claimed by the assessee u/s 80P of the Act on the reason that the assessee, a cooperative credit society is not a bank for the purposes of section 80P(4) of the Act Decided against Revenue.
Issues:
Allowability of deduction claimed by the assessee u/s 80P of the Income Tax Act. Analysis: The appeal was filed by the Revenue against the order of the Ld.CIT(A)-33, Mumbai, challenging the decision directing the AO to allow the deduction claimed by the assessee u/s 80P of the Act for the Assessment Years 2009-10. The assessee, a cooperative credit society, declared total income at NIL after claiming a deduction of Rs. 30,13,699/- under section 80P(2) of the Income Tax Act. The AO disallowed the deduction claim, determining the total income at Rs. 30,13,700/-, stating that the assessee is a cooperative society engaged in banking and thus eligible only for deduction u/s 36(1)(viia) of the Act. The Ld.CIT(A) held that the assessee is entitled to exemption u/s 80P of the Act. The Revenue contended that the assessee functions as a cooperative bank and is not entitled to the benefit of section 80P, as per section 80P(4) of the Act. The key issue revolved around determining whether the assessee, a cooperative credit society, qualifies as a cooperative bank for the purposes of section 80P(4) of the Act. The CBDT clarified that 'cooperative banks' mentioned in the said subsection refer specifically to State, Central, and Primary Co-operative Banks. The absence of a banking license from the Reserve Bank of India for the assessee indicated that it did not engage in banking business. Merely providing credit facilities to members did not transform the society into a bank for the purposes of section 80P(4) of the Act. Legal precedents, including decisions of the Gujarat High Court and the Tribunal, supported the view that cooperative societies providing credit facilities were eligible for deduction u/s 80P. Moreover, the distinction between cooperative societies registered under the Banking Regulation Act 1949 and the Maharashtra State Cooperative Societies Act 1960 highlighted that the assessee was not a cooperative bank for section 80P(4) purposes. The Tribunal's previous decisions in favor of similar assessee cases further supported the contention that cooperative credit societies were not considered banks under section 80P(4). The ITAT Mumbai upheld the Ld.CIT(A)'s decision, stating that the assessee, being a cooperative credit society, was not a bank for section 80P(4) purposes, thereby dismissing the Revenue's appeal.
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