2018 (3) TMI 1965 - AT - Income Tax

Deduction u/s 80P(2) - assessee was disbursing loans through its member primary banks which were treated as associate members - HELD THAT - Neither ld. Assessing Officer nor other authorities had the benefit of the judgment of Hon ble Apex Court in the case of The Citizen Co-Operative Society Ltd 2017 (8) TMI 536 - SUPREME COURT while deciding whether assessee was eligible for claiming deduction u/s.80P(2)(a) (i) of the Act. In fact ld. Commissioner of Income Tax (Appeals) had allowed the claim of the assessee u/s.80P(2)(a) (i) of the Act, considering an alternative ground of the assessee. In the circumstances, we are of the opinion that the issue requires a fresh look by the ld. Assessing Officer. We therefore set aside the orders of the lower authorities and remit the issue back to the file of the ld. Assessing Officer for consideration afresh in accordance with law. Appeal of the Revenue for both the years are allowed for statistical purpose.

Summary

Issues: Appeal against Commissioner of Income-tax (Appeals) order granting deduction u/s.80(P)(2) of the Act to the assessee.

Analysis:
1. Issue of Eligibility for Deduction u/s.80(P)(2) of the Act:
- The Revenue contended that the assessee, though not a normal Scheduled Bank, functioned as a bank and was disbursing loans through member primary banks treated as associate members. Citing a judgment of the Hon'ble Apex Court, the Revenue argued that the deduction could not be granted where the business of the society included lending to associate members.
- The Authorized Representative argued that the assessee was not recognized by the RBI as a bank, hence Section 80P(4) of the Act did not apply. The Tribunal had previously ruled in favor of the Revenue for a different assessment year.
- The Tribunal reviewed previous orders and noted that the issue was previously decided in favor of the Revenue. However, it was observed that the judgment of the Hon'ble Apex Court in a relevant case was not considered during the previous decisions. Therefore, the Tribunal set aside the lower authorities' orders and remitted the issue back to the Assessing Officer for a fresh consideration in accordance with the law.

2. Interpretation of Section 80P(4) of the Act:
- The Revenue argued that Section 80P(4) specifically disentitled a society engaged in banking business from claiming deduction u/s.80P(2)(a)(i) of the Act. They emphasized that the operations of the assessee were spread all over the State, not restricted to a Taluk.
- The Tribunal, after considering the submissions, relied on a decision of the Hon'ble Kerala High Court, which held that a cooperative society with other cooperative societies as members was not eligible for the exemption under Section 80P(4) of the Act. Consequently, the Tribunal reversed the order of the Commissioner of Income Tax (Appeals) and restored that of the Assessing Officer.

3. Application of Relevant Legal Precedents:
- The Tribunal noted that the judgment of the Hon'ble Apex Court in a specific case was not considered by the lower authorities while deciding the eligibility of the assessee for claiming deduction u/s.80P(2)(a)(i) of the Act. This led to the decision to remit the issue back to the Assessing Officer for a fresh consideration based on the legal provisions and relevant precedents.

In conclusion, the Tribunal allowed the appeal of the Revenue for statistical purposes and directed a fresh examination of the eligibility of the assessee for deduction u/s.80(P)(2) of the Act, considering the legal provisions and the judgment of the Hon'ble Apex Court that were not previously taken into account.