2016 (3) TMI 1059 - AT - Income Tax

Eligibility of deduction under sec. 80P(2)(a)(i) - Held that - sec. 80P(2)(a)(i) of the Act following the decision of the Hon ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT 2015 (6) TMI 573 - BOMBAY HIGH COURT wherein held that the contention of revenue that the appellant is not entitled to the benefit of Section 80P(2)(a)(i) of the Act in view of the fact that it deals with non-members cannot be upheld. This for the reason that Section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. As at the time when effect has been given to the order of this Court, the authorities under Act would restrict the benefit of deduction under Section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members. - Decided in favour of assessee.

Summary

Issues involved:
1. Allowance of deduction under sec. 80P(2)(a)(i) of the Income Tax Act, 1961.
2. Deletion of addition made under sec. 40(a)(ia) read with sec. 194A of the Act.

Analysis:

Issue 1: Allowance of deduction under sec. 80P(2)(a)(i) of the Income Tax Act, 1961:
The main issue in the appeals was whether the assessee, a Cooperative Society, was entitled to deduction under sec. 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer had rejected the claim of deduction on the basis that the assessee was a cooperative bank, not eligible for the deduction under sec. 80P(4). However, the Commissioner of Income Tax (Appeals) allowed the claim, emphasizing that the appellant did not meet the criteria of being a Primary Cooperative Bank as defined in the Banking Regulation Act. The Commissioner's decision was supported by the Hon'ble High Court's ruling in a similar case. The appellant's contention that it was not in the business of banking as it lacked a license from the Reserve Bank of India was also considered. The Tribunal upheld the Commissioner's decision, dismissing the Revenue's appeal due to the absence of any specific errors in the Commissioner's orders and the lack of contrary decisions cited by the Departmental Representative.

Issue 2: Deletion of addition made under sec. 40(a)(ia) read with sec. 194A of the Act:
Another grievance of the Revenue was the deletion of additions made under sec. 40(a)(ia) related to non-deduction of TDS on interest payments. The Assessing Officer disallowed the amounts for non-compliance with TDS provisions. However, the Commissioner of Income Tax (Appeals) deleted the disallowance, stating that the assessee-society was not considered a bank, hence not subject to TDS provisions. The Departmental Representative did not contest this ground during the hearing, leading to the dismissal of this appeal by the Tribunal.

In conclusion, the Tribunal confirmed the Commissioner's decisions in both issues, allowing the deduction under sec. 80P(2)(a)(i) and deleting the additions made under sec. 40(a)(ia). The appeals filed by the Revenue were dismissed, and the orders were pronounced at the close of the hearing.