2016 (4) TMI 1123 - AT - Income Tax

Revision u/s 263 - non entitled to deduction u/s. 80P - Held that - CIT has not discussed as to how the assessee society would fall under the definition of a co-operative bank. The order of the ld. CIT is a non-speaking order. He, without assigning any cogent and convincing reason, has set aside the order of the AO. Thus order of the AO cannot be said to be erroneous or prejudicial to the interest of the Revenue. The order of ld. CIT passed u/s. 263 of the Act is thus not sustainable in the eyes of law and same is set aside. - Decided in favour of assessee

Summary

Issues:
Appeal against CIT's order u/s. 263 of the Income Tax Act, 1961 regarding deduction u/s. 80P for a co-operative society.

Analysis:
The appeal was filed against the CIT's order under section 263 of the Income Tax Act, challenging the denial of deduction u/s. 80P for a co-operative society. The CIT contended that the society did not qualify for the deduction as it was deemed a co-operative bank under the amended Finance Act, 2006. The society argued it was a co-operative credit society, not a bank, and thus eligible for the deduction. The dispute centered on the interpretation of Sec. 80P(4) of the Act, which excludes co-operative banks from the deduction unless they are primary agricultural credit societies. The society highlighted its limited activities of providing credit facilities only to members, not to the public, and its non-applicability of Banking Regulations Act, 1950.

The society's counsel emphasized the differences between co-operative societies and banks, citing the objects of the society and previous Tribunal decisions. The Tribunal reiterated that the society's activities did not align with those of a co-operative bank, emphasizing the CBDT's clarification on the definition of a co-operative bank. The Tribunal also referenced the distinction between societies under different Acts, emphasizing that the society did not require a license from the RBI to conduct banking operations, unlike banks. The Tribunal upheld the CIT(A)'s decision, affirming the society's eligibility for the deduction u/s. 80P.

Regarding the CIT's order under section 263, the Tribunal found it to be a non-speaking order without sufficient reasoning to classify the society as a co-operative bank. Relying on the precedent set by the Tribunal and the society's unique characteristics, the Tribunal deemed the CIT's order unsustainable and allowed the appeal of the assessee. The Tribunal's detailed analysis and reliance on legal interpretations and precedents led to the favorable outcome for the assessee, confirming their eligibility for the deduction u/s. 80P.