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2015 (9) TMI 1658 - HC - Income TaxDeduction u/s 80 P(2) (a) (i) denied - AO opined that the assessee was not entitled to the deduction that the activity of the appellant was covered by Section 2 (24) (vii)(a) which requires the inclusion of profits and gains of any business of banking (including providing credit facilities) carried on by a co-operative society - Whether the benefit of deduction under Section 80 P(2) (a) (i) could be denied to the assessee on the footing that though the appellant was said to be a Co-operative Society it was in fact a co-operative bank within the meaning as assigned to such bank under Part V of the BR Act? - HELD THAT - There is a seriously disputed question of fact which the Authorities under the IT Act have taken upon themselves to interpret in the face of the BR Act prescribing that in the event of a dispute as to the primary object or principal business of any co-operative society referred to in clauses (cciv) (ccv) and(ccvi) of Section 56 of the BR Act a determination thereof by the Reserve Bank shall be final would require the dispute to be resolved by the Reserve Bank of India before the authorities could term the assessee as a co-operative bank for purposes of Section 80 P of the IT Act. Any opinion expressed therefore is tentative and is not final. The view expressed by this court BANGALORE COMMERCIAL TRANSPORT CREDIT CO-OPERATIVE SOCIETY LIMITED 2014 (6) TMI 913 - KARNATAKA HIGH COURT however as to the assessee being a co-operative society and not a co-operative bank in terms of Section 80P (4) of the IT Act shall hold the field and shall bind the authorities unless held otherwise by the Reserve Bank of India. - Decided in favour of assessee.
Issues Involved:
1. Eligibility for deduction under Section 80P(2)(a)(i) of the IT Act for the assessee. 2. Jurisdiction of IT Authorities to determine whether the assessee is a co-operative society or a co-operative bank under the BR Act. Detailed Analysis: 1. Eligibility for Deduction under Section 80P(2)(a)(i) of the IT Act: The primary issue was whether the assessee, a co-operative society, was eligible for deduction under Section 80P(2)(a)(i) of the IT Act. The Assessing Officer denied the deduction, reasoning that the assessee was engaged in activities akin to banking and thus fell under the definition of a "primary co-operative bank" as per Section 2(24)(viia) of the IT Act and Section 56(ccv) of the BR Act. The Tribunal upheld this view, leading to the appeal. The court referred to several precedents, including CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha and CIT vs. Bangalore Commercial Transporter Credit Society, which clarified the distinction between a co-operative society and a co-operative bank. These judgments emphasized that a co-operative society providing credit facilities to its members does not automatically become a co-operative bank unless it fulfills specific criteria under the BR Act. The court reiterated that the assessee did not possess a banking license from the RBI and did not exclusively carry on banking business. Therefore, it remained a co-operative society eligible for deduction under Section 80P(2)(a)(i). 2. Jurisdiction of IT Authorities: The second issue concerned whether IT Authorities had the jurisdiction to determine if the assessee was a co-operative society or a co-operative bank. The court noted that Section 56 of the BR Act stipulates that any dispute regarding the primary object or principal business of a co-operative society should be resolved by the Reserve Bank of India (RBI), whose determination is final. The court found that the IT Authorities had overstepped their jurisdiction by making determinations reserved for the RBI. It emphasized that any opinion by IT Authorities on this matter is tentative and not final. Conclusion: The court concluded that the assessee, being a co-operative society and not a co-operative bank, was entitled to the deduction under Section 80P(2)(a)(i) of the IT Act. It directed that unless the RBI determines otherwise, the authorities must treat the assessee as a co-operative society eligible for the deduction. The appeal was allowed in favor of the assessee, and the judgment of the Tribunal was set aside.
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