2018 (5) TMI 1600 - AT - Income Tax

Allowance of deduction u/s 80P - Held that - assessee is a cooperative bank a - as per the amended section 80P with the insertion of clause (4) it is made clear that deduction shall not be admissible to a co-operative bank - thus cooperative banks are now specifically excluded from the ambit of Section 80P - decided against the asessee. Disallowance of professional fees as TDS is not deducted u/s 194J - disallowance u/s 36(1)(va) - Held that - the matter is restored to the file of AO then allow the deduction where the payment to PF is made within the due date of filing of return of income u/s 139(1) - also matter for TDS is also restored to AO to verify if the tax has been deducted by the assessee at source or the recipients has paid tax on it by including the same in their income tax return

Summary

Issues:
1. Justification of passing order u/s.263 treating the assessment order as erroneous.
2. Eligibility of the assessee for deduction u/s.80P(2)(a)(i) of the Income Tax Act, 1961.
3. Disallowance of professional fee and employee's contribution.

Issue 1: The appeal challenged the order under section 263 of the Income Tax Act, 1961. The Bench proceeded with the case despite an adjournment application citing medical exigency. The issue was analyzed in light of the decision in the case of Citizen Co-operative Society Ltd vs ACIT. Ground Nos.1 & 6 were deemed general and required no separate adjudication.

Issue 2: The crux of this issue was the eligibility of the assessee for deduction u/s.80P(2)(a)(i). The Pr. CIT allowed the deduction initially, but upon review, found the assessee to be a cooperative bank, thus excluded from claiming the deduction under section 80P. The Pr. CIT's decision was supported by case laws and the amendment of section 80P, which specifically excludes cooperative banks from the deduction. The order under section 143(3) was set aside, directing a fresh assessment.

Issue 3: The Pr. CIT directed the disallowance of professional fees and employee's contribution, which was challenged in the appeal. The Pr. CIT's decision was to verify the employee's contribution and professional fee disallowance, ensuring compliance with TDS provisions and timely payments. The issue of disallowance u/s.40(a)(ia) and u/s.36(1)(va) was restored to the Assessing Officer for verification.

In conclusion, the appeal was dismissed, affirming the Pr. CIT's decision on all issues. The judgment extensively analyzed the eligibility of the assessee for deduction u/s.80P(2)(a)(i) and the compliance with TDS provisions for professional fees and employee's contributions. The decision was in line with legal provisions and precedents, ultimately upholding the Pr. CIT's order.