2016 (5) TMI 1521 - AT - Income Tax

Deduction u/s.80P - assessee was carrying on banking business - HELD THAT - As decided in Kulswami Co-operative Society assessee 2014 (4) TMI 355 - ITAT MUMBAI Co-operative Society does not fall within the restriction placed in sub-section (4) of section 80P of the Act, and decided the identical issue in favour of the assessee.

Summary

Issues:
1. Interpretation of section 80P of the Income Tax Act, 1961 regarding deductions claimed by a Co-operative Credit Society.
2. Application of section 80P(4) introduced w.e.f. 01.04.2007 by the Finance Act, 2006 to Co-operative Credit Societies.
3. Determination of whether a Co-operative Credit Society can be considered a Co-operative Bank for the purpose of section 80P of the Act.

Analysis:

Issue 1: Interpretation of section 80P of the Income Tax Act, 1961
The case involved a Co-operative Credit Society disputing the disallowance of deductions claimed under section 80P(2)(d) and section 80P(2)(a)(i) of the Income Tax Act, 1961 by the Assessing Officer (AO). The AO determined the gross total income of the assessee and disallowed the deductions based on the provisions of section 80P(4) introduced w.e.f. 01.04.2007. The Co-operative Credit Society challenged this assessment before the first appellate authority, arguing that the AO wrongly concluded that the amendment to section 80P(4) bars all Co-operative Banks other than specific types from claiming exemptions under the said sections.

Issue 2: Application of section 80P(4) to Co-operative Credit Societies
The first appellate authority, after hearing the assessee, allowed the grounds of appeal and held the Co-operative Credit Society as not falling under the restrictions of section 80P(4) as it was not carrying on banking business but extending credit facilities to its members only. The authority deleted the additions made by the AO under section 80P(2)(d) and 80P(2)(a)(i) of the Act, ruling in favor of the Co-operative Credit Society.

Issue 3: Determination of Co-operative Credit Society status
The Revenue appealed the decision before the Tribunal, arguing that the Co-operative Credit Society was carrying on banking business and thus should not be eligible for the exemptions under section 80P. The Tribunal, after considering the arguments from both sides, referred to a previous decision by the Mumbai ITAT in a similar case and held that the Co-operative Society in question did not fall within the restrictions of section 80P(4) of the Act. The Tribunal dismissed the appeal of the Revenue, upholding the decision in favor of the Co-operative Credit Society.

In conclusion, the Tribunal's decision clarified the application of section 80P to Co-operative Credit Societies, emphasizing the distinction between banking business and credit facilities. The judgment relied on precedent and statutory provisions to determine the eligibility of the Co-operative Credit Society for the claimed deductions under the Income Tax Act, 1961.