2015 (6) TMI 833 - AT - Income Tax

Exemption from payment of income tax on interest earned - principles of mutuality - Held that - The business activities predominantly involve banking and financing activities, which has resulted in substantial profits and includes interest income. The Hon ble Supreme Court in the case of Bangalore Club Vs CIT reported at 2013 (1) TMI 343 - SUPREME COURT , has held that the concept of mutuality shall not be extended to the interest incomes earned by a mutual association or a society. Accordingly, it was held that the interest incomes are exigible to the tax in the hands of the recipient. As observed, in this case, the appellant s income predominantly consists of interest income and profits from financing activities. In view of these distinguishing factors, this ground of appeal is hereby dismissed.- Decided against assessee. Eligibility for deduction under section 80P(2)(a) - Held that - The assessee shall place the bye-laws and other documentary evidences before the AO to support its claim that it was eligible for deduction under section 80P of the Act. Assessee has to prove that it has undertaken primary level agricultural development activities. Both the parties admitted that the issue stands covered by the decision in the case of Kerala Sate Co-operative Agricultural Rural Development Bank Ltd. 2011 (3) TMI 1011 - ITAT COCHIN . In line with the view taken therein we set aside the matter to the file of the AO with a direction to him to consider as to whether the assessee is entitled to deduction under section 80P of the Act. - Decided in favour of assessee for statistical purposes.

Summary

Issues:
1. Availability of deduction under section 80P of the Act for A.Y. 2008-09 to 2011-12.

Analysis:
1. Assessment Year 2008-09: The main issue revolved around the availability of deduction under section 80P of the Act. The appellant, a bank, argued that it was not a cooperative bank and thus eligible for the deduction. However, the AO contended that as a refinancing agent, the appellant was not eligible for the deduction. The CIT(A) also rejected the appellant's contention. The Tribunal referred to a Cochin Bench decision and remitted the matter to the AO for fresh consideration to determine the eligibility for the deduction under section 80P.

2. Assessment Year 2009-10: The appellant claimed deduction under section 80P of the Act. The Tribunal set aside the orders passed by the AO and CIT(A) and directed the AO to reconsider the matter in accordance with the law, allowing the appellant to furnish supporting documentary evidence.

3. Assessment Year 2010-2011: The appellant contended it was entitled to deduction under section 80P. The Tribunal, in line with previous decisions, remitted the matter to the AO for readjudication based on the evidence provided by the appellant.

4. Assessment Year 2011-12: The appellant claimed exemption under the principle of mutuality and deduction under section 80P. The Tribunal dismissed the claim based on previous court decisions and remitted the issue to the AO for fresh consideration based on the evidence presented by the appellant.

5. General Observations: The Tribunal set aside several alternative contentions raised by the appellant pending the determination of the main issue of deduction under section 80P. The Tribunal emphasized the need for proper documentation and evidence to support the appellant's claims and directed the AO to independently consider all issues in accordance with the law.

In conclusion, the Tribunal partly allowed the appeals filed by the assessee, remitting various issues to the AO for fresh adjudication based on the evidence presented and in accordance with the law.