2016 (7) TMI 1459 - AT - Income Tax

Deduction to the assessee under sec. 80P(2)(a)(i) - Held that - The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the decision in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT 2015 (6) TMI 573 - BOMBAY HIGH COURT - No contrary decision could be cited by the Departmental Representative. We, therefore, do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax A Addition made under sec. 40(a)(ia) read with sec. 194A - Held that - As we have already held that the assessee is not a bank while deciding the issue of allowability of deduction under section 80P(2), the provisions of section 40(a)(ia) would not apply insofar as no TDS is liable to be made by the assessee. - Appeal of revenue dismissed.

Summary

Issues Involved:
1. Allowance of deduction under sec. 80P(2)(a)(i) of the Income Tax Act, 1961.
2. Deletion of addition made under sec. 40(a)(ia) read with sec. 194A of the Act.

Issue 1: Allowance of deduction under sec. 80P(2)(a)(i) of the Income Tax Act, 1961:

The appeal was filed by the Revenue against the order of the Commissioner of Income Tax (Appeals), Panaji-1 regarding the allowance of deduction to the assessee under sec. 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer had rejected the claim of the assessee for deduction under sec. 80P(2)(a)(i) on the grounds that the assessee was a cooperative bank and not entitled to claim the deduction under sec. 80P(4). However, the Commissioner of Income Tax (Appeals) allowed the claim of the assessee based on the interpretation of the definition of a Primary Cooperative Bank under the Banking Regulation Act, 1949. The order highlighted that the appellant did not satisfy the conditions of being classified as a Primary Cooperative Bank and, therefore, was entitled to the benefit of deduction under Section 80P(2)(a)(i) of the Act. The judgment emphasized that the appellant's principal business was not banking, as the evidence did not support the conclusion that the appellant's primary business was accepting deposits from the public. The judgment also clarified that the bye-laws of the society did not prohibit the admission of any other cooperative society as a member, which was a mandatory condition for being considered a Primary Cooperative Bank.

Issue 2: Deletion of addition made under sec. 40(a)(ia) read with sec. 194A of the Act:

The Revenue's grievance in this issue was related to the deletion of the addition made under sec. 40(a)(ia) read with sec. 194A of the Act. The Revenue argued that the assessee satisfied all the conditions of a Cooperative Bank as per sec. 5(ccv) of Part-V of the Banking Regulation Act, 1949. However, the Tribunal found that the assessee was not considered a bank, as established while deciding the issue of deduction under section 80P(2). Therefore, the provisions of section 40(a)(ia) did not apply, and no TDS was liable to be made by the assessee. The Tribunal dismissed the appeal of the Revenue based on this finding.

In conclusion, the judgment by the Appellate Tribunal ITAT PANAJI addressed the issues of allowance of deduction under sec. 80P(2)(a)(i) of the Income Tax Act and the deletion of addition made under sec. 40(a)(ia) read with sec. 194A of the Act. The decision provided detailed analysis and interpretation of the relevant legal provisions and definitions under the Banking Regulation Act, 1949 to determine the eligibility of the assessee for the claimed deductions.