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2015 (8) TMI 1034 - AT - Income TaxDisallowance made under section 80P(4) - non applicability to a co-operative bank other than a Primary Co-operative Agricultural and Rural Development Bank or Primary Agricultural Society - CIT(A) delted the disallowance - Held that - No reason to interfere with the order of the learned Commissioner of Income-tax (Appeals). Obviously, the assessee is a co-operative society engaged in the business of providing credit facilities to its members. There is no dispute with reference to the transactions with the members, as the Assessing Officer has not considered that issue at all in the order. Therefore, the assessee being a co-operative society registered under the Andhra Pradesh Mutually Aided Co-operative Societies Act is eligible for deduction under section 80P(2)(a)(i) of the Act. Not only that, the assessee is also eligible for deduction under section 80P(2)(d) on the incomes received from other eligible co-operative societies/banks. Therefore, on the facts of the case, we do not see any reason to disallow the deduction under section 80P. The Revenue has raised the grounds that the provisions under section 80P(4) were applicable to the assessee. We do not see any reason to consider this ground as the restrictions brought out subsequently under section 80P(4) is applicable in the case of a co-operative bank not a co-operative society. - Decided against revenue.
Issues Involved:
1. Eligibility for deduction under section 80P(2)(a)(i) of the Income-tax Act. 2. Applicability of section 80P(4) to the assessee. 3. Classification of the assessee as a co-operative society or a co-operative bank. 4. Deduction under section 80P(2)(d) for interest received from co-operative societies and co-operative banks. 5. Additional claim of deduction under section 80P(2)(c). Detailed Analysis: 1. Eligibility for Deduction under Section 80P(2)(a)(i): The primary issue is whether the assessee, a co-operative society registered under the Andhra Pradesh Mutually Aided Co-operative Societies Act (APMACS Act), is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act. The Commissioner of Income-tax (Appeals) and the ITAT upheld that the assessee is engaged in providing credit facilities to its members and not in banking activities, thus qualifying for the deduction. The Assessing Officer's reliance on Circular No. 6 of 2010 was deemed inapplicable as it pertains to regional rural banks, not to the assessee's case. 2. Applicability of Section 80P(4): The Revenue argued that the assessee should be disqualified from claiming deductions under section 80P due to the applicability of section 80P(4). However, the ITAT clarified that section 80P(4) applies to co-operative banks and not to co-operative societies providing credit facilities to their members. This interpretation was supported by the decision in the case of ACIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd., which emphasized that the legislative intent was to tax co-operative banks, not credit co-operative societies. 3. Classification as Co-operative Society or Co-operative Bank: The Revenue contended that the assessee should be classified as a co-operative bank due to its banking activities. However, the ITAT and the Commissioner of Income-tax (Appeals) found that the assessee does not engage in typical banking activities such as opening savings accounts, issuing letters of credit, or acting as a clearing agent. The assessee submits annual reports to the Registrar of Societies, not the Reserve Bank of India, further supporting its classification as a co-operative society. 4. Deduction under Section 80P(2)(d): The ITAT upheld the assessee's eligibility for deduction under section 80P(2)(d) for interest received from co-operative societies and co-operative banks. The ITAT noted that co-operative banks are considered co-operative societies for the purpose of this section. The Assessing Officer's disallowance based on section 80P(4) was found to be inapplicable as it pertains to co-operative banks' income, not to interest received by co-operative societies from co-operative banks. 5. Additional Claim under Section 80P(2)(c): For the assessment year 2010-11, the assessee made an additional claim under section 80P(2)(c). Although the Commissioner of Income-tax (Appeals) accepted the eligibility for this deduction in principle, the claim was restricted to avoid the assessed income being less than the returned income. The total deduction was limited to the original claim of Rs. 1,72,46,463. Conclusion: The ITAT dismissed all the Revenue's appeals, affirming the assessee's eligibility for deductions under sections 80P(2)(a)(i) and 80P(2)(d). The classification of the assessee as a co-operative society was upheld, and the applicability of section 80P(4) was ruled out. The additional claim under section 80P(2)(c) was restricted to maintain consistency with the original return of income. The judgment emphasized the need for responsible action by tax authorities in preferring second appeals.
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