2014 (4) TMI 1249 - AT - Income Tax

Entitlement for deduction u/s 80P(2)(a)(i) - whether the Assessee is hit by the provisions of Sec. 80P(4) which was introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007? - HELD THAT - Sec. 80P(2)(a)(i) it is apparent that if the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business. From the reading of Sec. 80P(4) it is apparent that this section denies deduction to a co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank. The provisions of Sec. 80P(4) were introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007. The explanation to the section defines the co-operative bank and primary agricultural credit society to have the same meaning as assigned to them in Part-V of the Banking Regulation Act, 1949. It is not the case of either of the parties that the Assessee is a primary co-operative agricultural and rural development bank. It is also not the claim of the Assessee that Assessee is a primary agricultural credit society. If we read both the sections, Sec. 80P(2)(a)(i) and Sec. 80P(4) together, we find that the provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction. Since the assessee is a primary co-operative bank, therefore in our opinion the assessee is hit by the provision of section 80P(4) and assessee will not be entitled for deduction u/s 80P(2)(a)(i). As gone through the order of this tribunal for the assessment year 2006-07. We noted that this decision will not assist the assessee as there was no section 80P(4) there during the impugned assessment year. This section has been inserted w.e.f. 1.4.2007 Sec. 80P(2)(a)(i) it is apparent that if the co-operative society is engaged in carrying of business of banking or providing credit facilities to its members, the co-operative society is entitled for deduction on whole of the income relating to any one or more of such business. From the reading of Sec. 80P(4) it is apparent that this section denies deduction to a co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank. The provisions of Sec. 80P(4) were introduced in the statute by the Finance Act, 2006 w.e.f. 1.4.2007. The explanation to the section defines the co-operative bank and primary agricultural credit society to have the same meaning as assigned to them in Part-V of the Banking Regulation Act, 1949. It is not the case of either of the parties that the Assessee is a primary co-operative agricultural and rural development bank. It is also not the claim of the Assessee that Assessee is a primary agricultural credit society. If we read both the sections, Sec. 80P(2)(a)(i) and Sec. 80P(4) together, we find that the provisions of Sec. 80P(4) mandates that the provisions of Sec. 80P will not apply to any co-operative bank other than a primary agricultural credit society or primary co-operative agricultural and rural development bank but as per the provisions of Sec. 80P(2)(a)(i), a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members is entitled for deduction. Since the assessee is a primary co-operative bank, therefore in our opinion the assessee is hit by the provision of section 80P(4) and assessee will not be entitled for deduction u/s 80P(2)(a)(i). Also gone through the order of this tribunal for the assessment year 2006-07. We noted that this decision will not assist the assessee as there was no section 80P(4) there during the impugned assessment year. This section has been inserted w.e.f. 1.4.2007 Claim of the assessee u/s 80P(2)(a)(i) in respect of interest received by the assessee from Ratnakar Bank. We have already held that since the assessee is hit by the provisions of section 80P(4), therefore, the assessee is not entitled for the deduction u/s 80P(2)(a)(i). Accordingly, we dismiss the ground taken by the assessee in the C.O s . Appeals filed by the revenue are allowed.

Summary

Issues:
Appeal against CIT(A) order for assessment years 2007-08, 2008-09, and 2009-10. Grounds of appeal include interpretation of byelaws, applicability of section 80P, and treatment of interest income.

Analysis:
1. The appeals were filed by the revenue against the CIT(A) order for the assessment years 2007-08, 2008-09, and 2009-10. The main issues revolved around the interpretation of the society's byelaws, specifically regarding membership restrictions and the nature of activities permitted.

2. The primary contention was whether the Assessee, a cooperative society, was entitled to deduction under section 80P(2)(a)(i) for interest income received from Vishwanath Sugars Ltd. The Assessing Officer had treated this interest income as 'income from other sources' and disallowed certain expenses and deductions under section 80P(2)(a)(i).

3. The ITAT examined the provisions of section 80P, particularly 80P(4), which excludes certain cooperative banks from claiming deductions. The dispute centered on whether the Assessee qualified as a primary agricultural credit society or a primary cooperative agricultural and rural development bank, as per the explanation provided in the statute.

4. The ITAT noted that the Assessee's status as a primary cooperative bank made it ineligible for the deduction under section 80P(2)(a)(i) due to the provisions of section 80P(4). The tribunal emphasized the legislative intent behind these sections and ruled against the Assessee's claim for deduction.

5. The decision highlighted that previous judgments and decisions cited by the Assessee were not applicable post the introduction of section 80P(4) from April 1, 2007. The ITAT's analysis focused on the statutory provisions and their direct impact on the Assessee's eligibility for deductions under section 80P.

6. Ultimately, the ITAT allowed the revenue's appeals and dismissed the Assessee's Cross-Objections related to the claim under section 80P(2)(a)(i) for interest received from Ratnakar Bank. The orders of the CIT(A) allowing deductions were set aside, and the assessing officer was directed not to grant the deductions to the Assessee under section 80P(2)(a)(i).

7. The judgment, delivered on April 11, 2014, clarified the legal position regarding the Assessee's entitlement to deductions under section 80P and provided a detailed analysis based on the statutory framework and relevant precedents.