2018 (7) TMI 1257 - HC - Income Tax

Denial the benefit under Section 80P(2) - co-operative banks or not - Held that - It is not in dispute that the assesses/respondents herein are engaged in providing credit facilities to its members and have not obtained any banking licence to deny the benefit under Section 80P(2) of the Act as falling under Section 80P(4) of the Act, as a co-operative bank. The position of these assesses as co-operative societies being clear they cannot be construed as co-operative banks. We have no reasons to differ from the aforesaid co-ordinate Bench Judgments of this Court and accordingly we answer the substantial questions of law in favour of the assessee and against the revenue.

Summary

Issues:
1. Interpretation of Section 80P(2) and Section 80P(4) of the Income Tax Act, 1961 for deduction eligibility.
2. Whether co-operative societies providing credit facilities to members are entitled to deduction under Section 80P(2) or covered under Section 80P(4).

Analysis:
1. The main issue in this judgment revolves around the interpretation of Section 80P(2) and Section 80P(4) of the Income Tax Act, 1961. The Court considered whether the assessee-society is entitled to deduction under Section 80P(2) despite being covered under Section 80P(4) due to income from providing credit facilities. The Court relied on previous judgments to establish that the intention of the legislature was to exclude benefits under Section 80P from co-operative banks exclusively carrying on banking business, not co-operative societies providing credit facilities. The Court emphasized that the conditions for invoking Section 263 were not met, and the benefits under Section 80P(1) were not intended to be excluded from such societies.

2. The Court further analyzed the judgments of the Tribunal and previous decisions to determine the eligibility of co-operative societies for deduction under Section 80P(2). The Tribunal found that the societies in question were engaged in providing credit facilities to members without holding a banking license, thus not falling under the definition of a co-operative bank as per Section 80P(4). The Court concurred with the Tribunal's findings, emphasizing that the societies were not banks but co-operative societies entitled to exemption under Section 80P(2)(a)(i). The Court rejected the proposed substantial questions of law, upholding the Tribunal's decision based on the facts and precedent established in previous cases.

In conclusion, the judgment clarifies the distinction between co-operative banks and co-operative societies providing credit facilities under Section 80P of the Income Tax Act. It affirms the eligibility of co-operative societies for deduction under Section 80P(2) and rejects the notion that such societies should be treated as banks falling under Section 80P(4). The decision aligns with previous rulings and emphasizes the importance of factual findings in determining the tax treatment of co-operative societies engaged in providing credit facilities to members.