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2018 (6) TMI 1460 - AT - Income TaxRejection the deduction claimed u/s.80P (2)(a)(i) - Held that - As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench of this Tribunal in assessee s own case 2017 (12) TMI 1049 - ITAT MUMBAI we uphold the contention of the assessee and direct the Assessing Officer to examine and consider as to whether or not the assessee s activities are in compliance with the Maharashtra State Co-operative Act 1960 as also the Maharashtra State Co-operative Regulations 1961. If it is so found then in the absence of any licence from the Reserve Bank of India the assessee cannot be treated as an entity falling within the restrictions imposed in Sec. 80P(4) of the Act. So however if the findings of the Assessing Officer are to the contrary he shall be free to take appropriate action as per law. - decided in favour of assessee for statistical purposes.
Issues:
- Appeal against rejection of deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961. - Failure to satisfy all three conditions defining a primary co-operative bank. - Disallowance of deduction under section 80P based on maintaining a running account in a co-operative bank. - Applicability of the Maharashtra State Co-operative Act, 1960 and Regulations, 1961. - Examination of activities to determine compliance with legal provisions. Analysis: Issue 1: Rejection of deduction under section 80P(2)(a)(i): The appeals by the assessee challenged the rejection of the deduction claimed under section 80P(2)(a)(i) of the Income Tax Act, 1961. The contention was that the Commissioner of Income Tax (Appeals) erred in rejecting the deduction. The Tribunal noted that the issues in both appeals were common and identical, thus heard together. The grounds of appeal highlighted the failure to appreciate the conditions defining a primary co-operative bank, specifically the aspect of banking license and business activities. Issue 2: Compliance with conditions of a primary co-operative bank: The assessee argued that all three conditions defining a primary co-operative bank were not satisfied, indicating that it was not a co-op bank. The Tribunal considered the litmus test under the definition of a primary co-operative bank as per the Banking Regulation Act, emphasizing the need to fulfill all conditions to qualify as a co-op bank. The failure to meet these conditions raised doubts on the eligibility for the deduction under section 80P. Issue 3: Disallowance based on maintaining account in a co-operative bank: The Assessing Officer's finding that the appellant maintained a running account in a co-operative bank led to the disallowance of the deduction under section 80P. However, the Tribunal referred to a previous order in a similar case where compliance with the Maharashtra State Co-operative Act, 1960 and Regulations, 1961 was crucial. The absence of a banking license from the Reserve Bank of India was highlighted as a determining factor in such cases. Issue 4: Applicability of Maharashtra State Co-operative Act and Regulations: The Tribunal emphasized the importance of assessing whether the activities of the assessee complied with the Maharashtra State Co-operative Act, 1960 and Regulations, 1961. The absence of a license from the Reserve Bank of India to conduct banking business was a significant factor in determining the eligibility for deductions under section 80P. Issue 5: Examination of activities for compliance: The Tribunal directed the Assessing Officer to thoroughly examine and consider the activities of the assessee to ensure compliance with the relevant legal provisions. The need for proper verification regarding the nature of the activities vis-a-vis the Maharashtra State Co-operative Act and Regulations was emphasized to determine the eligibility for the claimed deductions. In conclusion, the Tribunal allowed the appeals for the Assessment Years 2012-13 and 2013-14, directing the Assessing Officer to re-examine the activities of the assessee for compliance with the Maharashtra State Co-operative Act, 1960 and Regulations, 1961, and the requirements under section 80P of the Income Tax Act, 1961.
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