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2015 (11) TMI 739 - AT - Income TaxDeduction under section 80P(2)(a)(i) denied - Held that - After considering the aims and objects of the assessee, it is held that the assessee is not a co-operative bank in terms of the Banking Regulation Act. The case law relied upon by the Commissioner of Income-tax (Appeals) are not squarely applicable on the case of the assessee. Therefore, we reverse the order of the learned Commissioner of Income-tax (Appeals). The assessee is entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act. - Decided in favour of assessee.
Issues Involved:
1. Jurisdictional validity of the additions and disallowances under section 143(3) of the Income-tax Act, 1961. 2. Denial of deduction claim under section 80P(2)(a)(i) of the Income-tax Act. 3. Application and interpretation of section 80P(4) of the Income-tax Act. Issue-wise Detailed Analysis: 1. Jurisdictional Validity of Additions and Disallowances: The appellant contended that the additions and disallowances made under section 143(3) were "bad in law and on facts of the case, for want of jurisdiction and various other reasons." However, the tribunal did not provide a detailed analysis on this specific ground, focusing instead on the substantive issues regarding deductions under section 80P. 2. Denial of Deduction Claim under Section 80P(2)(a)(i): The appellant, a co-operative society engaged in banking, claimed a deduction of Rs. 50,32,244 under section 80P(2)(a)(i), asserting it was an agricultural credit society. The Assessing Officer (AO) denied this deduction, citing the amendment in section 80P effective from April 1, 2007, which limited the deduction to agricultural credit societies or primary co-operative agricultural and rural development banks. The AO noted the lack of documentary evidence supporting the appellant's claim and added the deducted amount to the income. Upon appeal, the Commissioner of Income-tax (Appeals) upheld the AO's decision, emphasizing that the appellant-bank did not meet the conditions stipulated in section 80P(4). Specifically, the appellant's operations spanned multiple tehsils, and its objectives included providing loans for various purposes beyond agriculture and rural development. The Commissioner applied the principle of strict interpretation, rejecting the appellant's request for a liberal interpretation. 3. Application and Interpretation of Section 80P(4): The tribunal examined the appellant's claim that section 80P(4) was misinterpreted by the AO and the Commissioner. The appellant argued that it was not a co-operative bank but a society providing credit facilities to its members, and thus, section 80P(4) was inapplicable. The appellant relied on several judicial precedents and the Central Board of Direct Taxes (CBDT) Circular No. 14 of 2006, which clarified that section 80P(4) applies only to co-operative banks, not to credit co-operative societies. The tribunal agreed with the appellant, referencing various High Court rulings and ITAT decisions that supported the view that section 80P(4) does not apply to credit co-operative societies. The tribunal concluded that the appellant, being a credit co-operative society and not a co-operative bank, was entitled to the deduction under section 80P(2)(a)(i). Conclusion: The tribunal reversed the order of the Commissioner of Income-tax (Appeals), allowing the appellant's claim for deduction under section 80P(2)(a)(i). The tribunal emphasized that the appellant met the criteria for deduction as a co-operative society providing credit facilities to its members, and the restrictive provisions of section 80P(4) did not apply. The appeal was allowed in favor of the appellant.
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