2015 (6) TMI 1237 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - assessee is a cooperative society engaged in providing credit facilities to its members - HELD THAT - It is also undisputed that the assessee is not a cooperative bank - We find that in the present case the assessee has contended before the Assessing Officer that it deals only with its members and accepts deposits and gives loans only to its members. This has not been disputed by the AO - Accordingly in the background of above discussion and precedent, we do not find any infirmity in the order of learned CIT(Appeals). Accordingly, we uphold the same.

Summary

Issues:
1. Eligibility for deduction under section 80P(2)(a)(i).

Analysis:
The appeal before the Appellate Tribunal concerned the eligibility of the assessee for deduction under section 80P(2)(a)(i). The Tribunal noted that the assessee, a cooperative society providing credit facilities to its members, was not a cooperative bank. The Tribunal considered the distinction between credit cooperative societies and cooperative banks, emphasizing that the assessee fell under the Maharashtra Cooperative Society Act and could not conduct banking business without meeting specific regulatory requirements. The Tribunal found that the Assessing Officer had failed to correctly apply the legal provisions and directed the allowance of the deduction claimed by the appellant under section 80P of the Income Tax Act.

The Tribunal observed that the learned CIT(Appeals) had correctly analyzed the situation, and previous decisions by the ITAT and the Hon'ble Bombay High Court had favored the assessee. The Hon'ble High Court had emphasized that the appellant's principal business was not banking, as it did not satisfy the necessary conditions to be considered a cooperative bank under the Banking Regulation Act, 1949. The Tribunal agreed with the findings that the appellant dealt only with its members, accepting deposits and providing loans exclusively to them, which was undisputed by the Assessing Officer. Therefore, the Tribunal upheld the order of the learned CIT(Appeals) and dismissed the appeal of the Revenue.

In conclusion, the judgment clarified the eligibility criteria for deduction under section 80P(2)(a)(i) for cooperative societies providing credit facilities to their members. It highlighted the importance of distinguishing between credit cooperative societies and cooperative banks, ensuring compliance with relevant regulatory frameworks. The decision underscored the need for assessing authorities to consider the nature of the entity's operations and its adherence to legal requirements when determining eligibility for tax deductions.