2017 (9) TMI 470 - AT - Income Tax

Deduction u/s. 80P(2)(a)(i) and u/s 80P(2)(d) - dividend received by the assessee from its share holdings in other co-operative societies - Held that - Since the facts whether the assessee has different categories of members; first resident members or ordinary members and second nominal members and whether the assessee is getting the deposits from nominal members and advancing loan to the resident members/ordinary members are not on record and has not been examined by this Tribunal in the assessment year 2012-13 whether the fact that the assessee is engaged in the activity of granting loan to general public has also not been examined by the authorities below we, therefore, in the interest of justice and fair play to both the parties, restore this issue to the file of the Assessing Officer by setting aside the order of the CIT(A) with the direction that the Assessing Officer shall examine this issue and decide afresh in view of the observation of Hon ble Supreme Court made in the case of The Citizen Co-operative Society Limited vs. ACIT, Circle-9(1), Hyderabad (2017 (8) TMI 536 - SUPREME COURT ) In respect of claim of deduction under section 80P(2)(d) on dividend income received from the co-operative society is concerned, in our opinion this issue will depend upon the outcome of the first issue. If the assessee is entitled to deduction under section 80P(2)(a)(i) the assessee will also be entitled for deduction under section 80P(2)(d). Since the issue is consequential to the issue involved about the claim of the assessee under section 80P(2)(a)(i), therefore, the order of the CIT(A) is also set aside on this issue and this also is restored to the file of the AO with the direction that the AO shall redecide this issue. Appeal filed by the Revenue is allowed for statistical purposes.

Issues Involved:
1. Deduction under Section 80P(2)(a)(i) for a co-operative bank.
2. Deduction under Section 80P(2)(d) for dividend income.
3. Finality of the decision regarding deductions under Section 80P(2)(a)(i) and 80P(2)(d).
4. Previous year's decision pending before ITAT.

Detailed Analysis:

1. Deduction under Section 80P(2)(a)(i) for a co-operative bank:
The primary issue is whether the assessee qualifies as a co-operative credit society or a co-operative bank for the purposes of deduction under Section 80P(2)(a)(i). The Revenue argued that the assessee is involved in normal banking activities, which are commercial in nature, thus classifying it as a co-operative bank rather than a co-operative credit society. The CIT(A) had allowed the deduction, but the Revenue contested this decision, citing a recent Supreme Court judgment in the case of The Citizen Co-operative Society Limited vs. ACIT. The Tribunal noted that the Supreme Court had distinguished between co-operative societies and co-operative banks, emphasizing that co-operative banks are excluded from Section 80P benefits. The Tribunal decided to remand the issue back to the Assessing Officer (AO) to re-examine the facts in light of the Supreme Court's decision, specifically whether the assessee's activities align with those of a co-operative bank or a co-operative society.

2. Deduction under Section 80P(2)(d) for dividend income:
The second issue pertains to the assessee's entitlement to deduction under Section 80P(2)(d) for dividend income received from other co-operative societies. The CIT(A) had allowed this deduction, but the Revenue challenged the decision. The Tribunal held that the resolution of this issue is contingent upon the determination of the first issue. If the assessee qualifies for deduction under Section 80P(2)(a)(i), it would also be entitled to the deduction under Section 80P(2)(d). Therefore, this matter was also remanded to the AO to be decided in conjunction with the first issue.

3. Finality of the decision regarding deductions under Section 80P(2)(a)(i) and 80P(2)(d):
The Revenue contended that the CIT(A) erred in allowing the deductions as the issues had not reached finality, with the Department not accepting the decision of the Bombay High Court in the case of Quepem Urban Co-op. Credit Society. The Tribunal acknowledged that the Supreme Court's decision in The Citizen Co-operative Society Limited case must be considered. Consequently, the Tribunal directed the AO to re-examine the deductions in light of this Supreme Court ruling.

4. Previous year's decision pending before ITAT:
The Revenue also argued that the CIT(A) had erred in allowing the deductions without considering that the Department had not accepted the CIT(A)'s decision in the assessee's case for the previous assessment year (2012-13), which was pending before the ITAT. The Tribunal noted that the matter should be re-evaluated by the AO, considering the Supreme Court's recent judgment, ensuring consistency and adherence to the legal precedent.

Conclusion:
The Tribunal set aside the CIT(A)'s order and remanded the issues back to the AO for a fresh examination in light of the Supreme Court's decision in The Citizen Co-operative Society Limited vs. ACIT. The AO is directed to re-assess the eligibility of the assessee for deductions under Sections 80P(2)(a)(i) and 80P(2)(d), taking into account the specific findings and legal interpretations provided by the Supreme Court. The appeal filed by the Revenue is allowed for statistical purposes.

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