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2016 (11) TMI 1603 - AT - Income TaxEntitlement to the benefit of deduction u/s. 80P(2)(a)(i) - AO held that the assessee is engaged in the business of banking and in view of section 80P(4) since the assessee is not a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank it is not entitled to deduction - Held that - The Hon ble High Court of Kerala has categorically held in assessee s own case for the assessment year 2007-08 2016 (5) TMI 1164 - KERALA HIGH COURT that the assessee is not a primary agricultural credit society and it is a co-operative bank. The Hon ble High Court further held that the assessee is not entitled to deduction u/s. 80P(2) of the Act in view of introduction of section 80P(4) of the Act with effect from 01/04/2007. Thus order of the CIT(A) in denying the benefit of deduction u/s. 80P(2) of the Act is correct - Decided against assessee. Disallowance of contribution made to unrecognized Superannuation Fund - Held that - We notice that for the assessment year 2009-10 the assessee has accepted the CIT(A) s order and no further appeal was preferred to the Tribunal. The assessee s contention that to the extent of withdrawals made by the employees from unrecognized provident fund should be allowed as deduction u/s. 37 of the I.T. Act was never raised before any of the authorities below. Hence this plea of the assessee is rejected.
Issues Involved:
1. Entitlement to deduction under section 80P(2)(a)(i) of the Income Tax Act. 2. Justification of disallowing contributions made to an unrecognized Superannuation Fund. Issue-wise Detailed Analysis: 1. Entitlement to Deduction Under Section 80P(2)(a)(i) of the Income Tax Act: The primary issue is whether the assessee qualifies for the deduction under section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer denied this deduction for the assessment years 2010-11 and 2011-12, arguing that the assessee is engaged in the business of banking. According to section 80P(4), the deduction does not apply to cooperative banks other than primary agricultural credit societies or primary cooperative agricultural and rural development banks. The Assessing Officer noted that the assessee does not fit these definitions and is, therefore, not entitled to the deduction. The CIT(A) upheld the Assessing Officer's decision, referencing a previous Tribunal order and a High Court judgment, which confirmed that the assessee is not a primary agricultural credit society but a cooperative bank. The High Court's judgment emphasized that the assessee falls within the term "co-operative bank" as per section 5(cci) of the Banking Regulation Act and is not entitled to the deduction under section 80P(2) due to the introduction of section 80P(4). The Tribunal, after considering the arguments and the High Court's findings, upheld the CIT(A)'s order, denying the deduction under section 80P(2)(a)(i) of the Act. 2. Justification of Disallowing Contributions to an Unrecognized Superannuation Fund: The second issue concerns the disallowance of contributions made to an unrecognized Superannuation Fund. The CIT(A) confirmed the Assessing Officer's disallowance, stating that the fund is neither a recognized provident fund nor an approved gratuity fund under sections 36(1)(iv) and 36(1)(v) of the Act. According to section 40A(9), deductions for payments not in accordance with sections 36(1)(iv) or 36(1)(v) are not allowable. The assessee argued that the contributions should be allowed as a business expenditure under section 37 when employees withdraw amounts from the fund. However, this argument was not raised before any authorities below, and the Tribunal rejected this plea, upholding the CIT(A)'s decision. Appeals by the Revenue: For the assessment years 2010-11 and 2011-12, the revenue raised grounds challenging the CIT(A)'s direction to allow limited deduction under section 80P(2)(a)(i) for activities as a State Land Development Bank. The CIT(A) had followed the Tribunal's order for AY 2007-08, which allowed such deductions. The revenue argued that the High Court had already held that the assessee is not a primary cooperative agricultural and rural development bank. The Tribunal noted that the revenue did not challenge the Tribunal's previous findings for AY 2007-08 in the High Court, which had attained finality. Hence, the Tribunal remitted the matter back to the Assessing Officer for fresh consideration, directing them to review the details of the order giving effect to the Tribunal's order for AY 2007-08 and decide in accordance with the law. Conclusion: The appeals filed by the assessee were dismissed, and the appeals by the revenue were allowed for statistical purposes, with directions for fresh consideration by the Assessing Officer. The order was pronounced on 3rd Nov 2016.
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