2014 (9) TMI 1188 - HC - Income Tax

Deduction u/s 80P(2)(a)(i) - HELD THAT - THE COMMISSIONER OF INCOME TAX AND THE INCOME TAX OFFICER WARD I, BAGALKOT VERSUS SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT 2015 (1) TMI 821 - KARNATAKA HIGH COURT when the status of the assessee is a Co-operative society and is not a Co- operative bank, the order passed by the Assessing Authority extending the benefit of exemption from payment of tax under Section 80P(2)(a)(i) of the Act is correct. - Decided in favour of the assessee.

Summary

Issues:
- Interpretation of Section 80P(2)(a)(i) of the Income Tax Act regarding deduction eligibility for a society.

Analysis:
The High Court of Karnataka heard an appeal by the Revenue against a Tribunal order. The main issue revolved around the interpretation of Section 80P(2)(a)(i) of the Income Tax Act to determine if the assessee-society was entitled to a deduction. The Court referred to a previous case, THE COMMISSIONER OF INCOME TAX VS. SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA, BAGALKOT, where it was clarified that a cooperative bank exclusively engaged in banking business cannot avail the deduction, while a society providing credit facilities to its members falls under the purview of the deduction. The judgment highlighted that the legislative intent was not to exclude the benefit under Section 80P(2)(a)(i) for societies engaged in providing credit facilities. Consequently, the Court ruled in favor of the assessee based on this interpretation.

Therefore, the High Court dismissed the appeal in line with the precedent set in the referenced case. The judgment emphasized that if an entity is not exclusively carrying out banking business like a cooperative bank and is involved in lending money to its members, it falls within the scope of Section 80P(2)(a)(i) for providing credit facilities. The Court's decision was based on the understanding that the legislative amendment aimed to differentiate between cooperative banks and societies engaged in banking for providing credit to members, ensuring the latter group could benefit from the deduction under the Income Tax Act. The appeal was consequently rejected, affirming the entitlement of the assessee-society to the deduction under Section 80P(2)(a)(i) as per the legal interpretation provided in the judgment.