2015 (2) TMI 1284 - AT - Income Tax

Deduction u/s 80P - assessee carries on the banking business and other business in the name of a credit cooperative society - Held that - Activities of the assessee were limited to the members of a specific group and the area of operative was also limited to the acceptance of deposits of the members and providing credit facilities only to the members, which have been held not falling under the banking activities as defined in the Banking Regulation Act - CIT (A) has rightly adjudicated the issue under consideration by holding that the assessee as a cooperative bank, the deduction of claim u/s 80P(2)(a)(i) of the Act cannot be denied is fair and reasonable and it does not call for any interference. - Decided against revenue

Summary

Issues:
1. Allowance of deduction u/s 80P to the assessee carrying on banking business.
2. Consideration of insertion of section 80P(4) and sub-clause (viia) to section 2(24).
3. Comparison of the case with previous judgments.
4. Non-compliance with own order in a similar case.
5. Justification for deleting the addition based on banking activities definition.

Analysis:
1. The appeal was filed by the Revenue against the order of the CIT (A) for the assessment year 2010-2011. The Revenue contested the allowance of deduction u/s 80P to the assessee, arguing that the assessee operated a banking business through a credit cooperative society. The Assessing Officer held that the assessee fulfilled the conditions to be considered a cooperative bank, thus disallowing the deduction. The CIT (A) allowed the assessee's appeal, emphasizing that the activities were limited to specific members and did not constitute banking activities as defined in the Banking Regulation Act.

2. The Revenue raised concerns regarding the insertion of section 80P(4) and sub-clause (viia) to section 2(24) from the Finance Act 2006. However, the CIT (A) found that the facts of the case did not align with the Assessing Officer's interpretation and were more in line with previous decisions where limited activities within a specific group did not qualify as banking activities. The CIT (A) relied on precedents to support the allowance of the deduction u/s 80P(2)(a)(i) to the assessee.

3. The CIT (A) distinguished the case from previous judgments cited by the Assessing Officer, highlighting that the assessee's activities were similar to cases where deductions were allowed due to the limited scope of operations. The CIT (A) referenced specific cases to support the decision that the assessee's activities did not fall under the definition of banking activities as per the Banking Regulation Act.

4. The Revenue contended that the CIT (A) did not follow its own order in a previous case, questioning the consistency of decisions. However, the CIT (A) justified the distinction based on the specific facts and activities of the assessee, which warranted a different outcome compared to the previous order.

5. The final issue revolved around the justification for deleting the addition based on the definition of banking activities. The CIT (A) reasoned that the limited scope of operations and the specific target group of the assessee did not align with traditional banking activities, leading to the deletion of the addition. The Tribunal upheld the CIT (A)'s decision, dismissing the Revenue's appeal and affirming the allowance of the deduction u/s 80P(2)(a)(i) to the assessee.