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2014 (12) TMI 380 - AT - Income TaxValidity of rectification order u/s 154 Eligibility for deduction u/s 80P(2)(a)(i) - Whether the credit cooperative societies are cooperative banks as the deduction u/s. 80P(2)(a)(i) of the Act was available to credit co-operative societies providing credit facilities to its members Assessee under a mistake could not file for the claim of deduction rectification application filed for the purpose - Held that - CIT(A) was rightly of the view that the co-operative banks are not entitled to deduction u/s 80P(2)(a)(i) as per the amendment to section 80P(4) by Finance Act 2006 w.e.f. 01.04.2007 - the meaning of co-operative credit society is separately given and it does not include co-operative bank other than co-operative land mortgage bank also CBDT circular bearing No.3/2008 dated 12.03.2008 also makes it clear that the amendment to section 80P(4) has withdrawn the deduction u/s 80P in respect of co-operative banks - the amendment to section 36(1)(viia) by Finance Act 2007 w.e.f. 01.04.2007 also provides that the deduction in respect of bad debts shall be allowable also to co-operative banks - credit co-operative societies are not covered by the meaning of Cooperative Banks as defined in part V of the Banking Regulation Act 1949 and are entitled to deduction u/s 80P(2)(a)(i) of the Act - similar issue has been decided in ITO v. Jankalyan Nagri Sahakari Pat Sanstha Ltd. 2012 (9) TMI 288 - ITAT PUNE - the CIT(A) was justified that co-operative society is not a co-operative bank and therefore the assessee credit co-operative society is entitled to deduction u/s 80P(2)(a)(i) of the Act. Also in CIT v. Smt. Archana R. Dhanwatey 1981 (1) TMI 27 - BOMBAY High Court it was held that under the I.T. Act 1961 the authorities are obliged to act in accordance with law - Tax has to be collected as per the provision of the Act - If an assessee under a mistake misconceptions or on being not properly instructed is over assessed the concerned authority under the Act is obliged required to assist such an assessee by ensuring that only legitimate taxes are determined as collectible - If particular levy is not permissible under the Act the tax cannot be collected thus the CIT(A) was justified in holding that the assessee is eligible for deduction u/s.80P(2)(a)(i) of the Act and the assessee society is eligible for deduction u/s 80P(2)(a)(i) of the Act thus the order of the CIT(A) is upheld Decided against revenue.
Issues Involved:
1. Allowability of deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Classification of the assessee as a credit co-operative society versus a co-operative bank. 3. The impact of clerical errors in e-filing returns on the eligibility for deductions. 4. The authority of appellate bodies to allow deductions not claimed in the original return. Detailed Analysis: 1. Allowability of Deduction under Section 80P(2)(a)(i): The primary issue is whether the assessee, a credit co-operative society, is eligible for a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. The assessee initially did not claim this deduction in its return but later filed an application under section 154 of the Act to rectify this omission. The Assessing Officer rejected this application, but the CIT(A) allowed the deduction, stating that the mistake was rectifiable and the assessee was eligible for the deduction. 2. Classification of the Assessee: The Revenue argued that the assessee should be classified as a primary co-operative bank, which would disqualify it from claiming the deduction under section 80P(2)(a)(i) due to the amendment in section 80P(4) by the Finance Act, 2006. The CIT(A) and ITAT concluded that the assessee is a credit co-operative society, not a co-operative bank. They referred to the definitions in the Banking Regulation Act, 1949, and clarified that a credit co-operative society is distinct from a co-operative bank. The ITAT emphasized that the assessee's primary objective is to provide financial accommodation to its members, which aligns with the definition of a credit co-operative society. 3. Impact of Clerical Errors in E-Filing Returns: The CIT(A) acknowledged that the e-filing system's recent implementation could lead to clerical errors. The CIT(A) referred to a similar case (Shrikant Real Estates (P.) Ltd. v. ITO Mumbai) where the ITAT allowed rectification of such errors under section 154 of the Act. The CIT(A) held that the clerical mistake in not claiming the deduction in the e-return was rectifiable, and the assessee's claim was allowed. 4. Authority of Appellate Bodies to Allow Deductions: The CIT(A) and ITAT both held that appellate authorities have the power to allow deductions even if they were not claimed in the original return. This view is supported by precedents such as CIT v. Ramco International and CIT v. Metalman Auto (P.) Ltd., where courts allowed deductions that were legally permissible under the Income Tax Act, even if not claimed initially. The ITAT emphasized that the correct income should be assessed as per the provisions of the Act, and only legitimate taxes should be collected. Conclusion: The ITAT upheld the CIT(A)'s decision, confirming that the assessee, a credit co-operative society, is entitled to the deduction under section 80P(2)(a)(i) of the Act. The appeal filed by the Revenue was dismissed, and the CIT(A)'s reasoned finding was upheld, requiring no interference. The judgment emphasized the importance of rectifying clerical errors in e-filing and ensuring that only legitimate taxes are collected as per the Income Tax Act.
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