2015 (10) TMI 1434 - AT - Income Tax

Deduction claimed u/s. 80P(2)(a)(i) disallowed - Held that - Sec. 80P(4) was introduced by the Finance Act 2006 w.e.f. 01/04/2007 excluding the said benefit to a Cooperative Bank. Thus, the intention of the legislature is clear if a cooperative bank is exclusively carrying on banking business, then income derived from the said business cannot be deducted in computing the total income of the assessee, as the assessee is not a Cooperative Bank carrying on exclusively banking business and there is no finding that it possess a licence from RBI to carryon business. It is not a Cooperative Bank, it is a Cooperative Society which also carries on business of lending money to its Members which is covered u/s. 80P(2)(a)(i). Set aside the findings of the Ld. CIT(A) and direct the Assessing Officer to allow deduction u/s. 80P(2) of the Act as claimed by the assessee. See CIT Vs. Billuru Gurubasava Pattinas Sahakari Sangha Niyamat 2015 (1) TMI 821 - KARNATAKA HIGH COURT - Decided in favour of assessee.

Summary

Issues:
- Appeal against disallowance of deduction u/s. 80P(2)(a)(i) of the Act.

Analysis:
1. The appellant, a Cooperative Society, appealed against the disallowance of the deduction claimed u/s. 80P(2)(a)(i) of the Act by the Ld. CIT(A) for A.Y. 2009-10.

2. The Assessing Officer disallowed the deduction by applying section 2(24)(viia) of the Act, which was upheld by the Ld. CIT(A). The appellant contended that as a Cooperative Society registered under the Karnataka State Cooperative Societies Act, it was entitled to the deduction u/s. 80P(2) of the Act.

3. The Tribunal noted that the appellant was not a Cooperative Bank and did not hold a banking license. Its primary business was to provide credit facilities to its members. Section 80P of the Act allows deductions for income of the society, and the appellant's activities fell under sub-section (2) of the same. The introduction of section 80P(4) by the Finance Act 2006 excluded the benefit for Cooperative Banks exclusively engaged in banking business.

4. Relying on judicial precedents, including a decision of the Hon'ble Karnataka High Court, the Tribunal concluded that the appellant, being a Cooperative Society engaged in lending money to its members, was eligible for the deduction u/s. 80P(2)(a)(i). The Tribunal set aside the Ld. CIT(A)'s findings and directed the Assessing Officer to allow the deduction as claimed by the appellant.

5. Consequently, the appeal filed by the appellant was allowed, and the order was pronounced in the open court on 15.6.2015.