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2019 (7) TMI 1521 - AT - Income TaxDenial of claim of deduction u/s 80P - AO while denying the claim of assessee had held the assessee can be treated as a Cooperative Bank looking at the nature of activities of the assessee and since Co-operative Banks are not eligible for deduction u/s 80P on the amount invested in banks other than those mentioned u/s 80P(2)(d) - HELD THAT - Hon ble Bombay High Court in the case of Jalgaon District Co-operative Central Cooperative Bank Ltd. 2003 (9) TMI 56 - BOMBAY HIGH COURT has held that the definition of member given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member associate member and sympathizer member and there is no distinction made between duly registered member and nominal associate and sympathizer member. Following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd. 2012 (9) TMI 288 - ITAT PUNE and following the same hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e. Co-operative Banks and other Banks. In the view that in the present case the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. 2019 (1) TMI 116 - MADRAS HIGH COURT would be applicable. Therefore following the ratio of the decisions cited herein above and the decision of Hon ble Bombay High Court hold that assessee is eligible for deduction u/s 80P of the Act. Thus the grounds of the assessee are allowed.
Issues Involved:
1. Denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Treatment of the appellant as a "Business Financer" instead of a Credit Co-operative Society. 3. Denial of deduction under Section 80P(2)(d) for interest received from Pune District Central Co-operative Bank. 4. Non-allowance of proportionate deduction under Section 80P for eligible income earned. Issue-wise Detailed Analysis: 1. Denial of Deduction under Section 80P(2)(a)(i): The primary issue is the denial of the deduction claimed under Section 80P(2)(a)(i) amounting to ?18,38,878/-. The Assessing Officer (AO) observed that the assessee provided credit facilities to non-members and nominal members, which violated the bye-laws of the society. The AO concluded that the assessee acted like a regular bank, thus disqualifying it from the deduction under Section 80P(2)(a)(i). The Commissioner of Income Tax (Appeals) [CIT(A)] upheld this view, citing that the society was not involved in cooperative activities but rather in finance business, referencing the Supreme Court's decision in Citizen Cooperative Society Ltd. vs. ACIT. 2. Treatment as a "Business Financer": The AO and CIT(A) treated the appellant as a "Business Financer" rather than a Credit Co-operative Society. This conclusion was based on the observation that the society accepted deposits from nominal members and non-members without proper approval from the Managing Committee, thereby violating its bye-laws. The CIT(A) noted that the activities were more in the nature of business finance, similar to the case decided by the Supreme Court in Citizen Cooperative Society Ltd. vs. ACIT. 3. Denial of Deduction under Section 80P(2)(d): The AO denied the deduction under Section 80P(2)(d) for interest received from Pune District Central Co-operative Bank, arguing that the society should invest surplus funds with a Co-operative Society and not with Co-operative Banks. The CIT(A) upheld this denial, emphasizing that the society did not qualify for deductions under Section 80P due to its activities being akin to those of a cooperative bank. 4. Non-allowance of Proportionate Deduction: The assessee argued for a proportionate deduction under Section 80P for the eligible income earned. However, both the AO and CIT(A) did not allow this, maintaining that the society's activities disqualified it from any deductions under Section 80P. Tribunal's Findings: On Section 80P(2)(a)(i): The Tribunal noted that the AO's interpretation was incorrect. It referenced the decision of the Co-ordinate Bench in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., which distinguished between a Cooperative Credit Society and a Cooperative Bank. The Tribunal held that the assessee, being a Cooperative Credit Society, was entitled to deduction under Section 80P(2)(a)(i). On Treatment as a "Business Financer": The Tribunal disagreed with the lower authorities' treatment of the appellant as a "Business Financer." It highlighted that the definition of "member" under the Maharashtra Co-operative Societies Act includes nominal, associate, and sympathizer members, which was not considered by the AO and CIT(A). The Tribunal found the facts of the assessee's case different from those in Citizen Cooperative Society Ltd. vs. ACIT, thus making the latter inapplicable. On Section 80P(2)(d): The Tribunal held that the assessee was eligible for deduction under Section 80P(2)(d) for interest received from investments in Co-operative Banks, following the precedent set by the Co-ordinate Bench in Jankalyan Nagri Sahakari Pat Sanshta Ltd. On Proportionate Deduction: Given the Tribunal's findings on the eligibility of deductions under Sections 80P(2)(a)(i) and 80P(2)(d), the issue of proportionate deduction became moot. Conclusion: The Tribunal allowed the appeals, granting the deductions under Section 80P of the Income Tax Act, 1961, to all the assessees involved. The Tribunal's decision was based on the interpretation of relevant statutes and precedents, distinguishing the facts of the present case from those cited by the lower authorities.
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