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2018 (12) TMI 758 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - AO rejected the assessee s claim for the reason that the primary / principal business of the assessee is transacting in banking business, therefore the assessee is a primary co-operative bank and it does not fall under the second category of co-operative credit societies as envisaged under Section 80P - Held that - Respectfully following the decision of the co-ordinate bench of this Tribunal in the case of Udaya Souharda Credit Co-operative Society Ltd. 2018 (8) TMI 1063 - ITAT BANGALORE we accordingly set aside the impugned order of the CIT (Appeals) for Assessment Year 2014-15 and restore the matter of the eligibility of the assessee s claim for deduction under Section 80P(2) to the file of the AO for re-examination of all aspects thereof by causing necessary enquiries to be made in the matter and to adjudicate thereon by way of a reasoned and speaking order in term of the observations and directions issued by the co-ordinate bench in the case of Udaya Souharda Credit Co-operative Society Ltd. (supra). Since the impugned order of the learned CIT (Appeals) has been set aside and the matter restored to the file of the Assessing Officer for re-examination and adjudication, we refrain from adjudicating the issues / grounds raised by the assessee on merits. - Revenue s appeal allowed for statistical purposes.
Issues Involved:
1. Entitlement for deduction under Section 80P(2)(a)(i) of the Income Tax Act. 2. Classification of the assessee as a primary co-operative bank or a co-operative credit society. 3. Validity of registration under the Karnataka Souharda Sahakari Act, 1997. 4. Reliance on the decision of CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha. 5. Applicability of the Supreme Court's decision in the case of The Citizen Co-operative Society Ltd. vs. ACIT. 6. Deduction of foreign tour expenses. Issue-wise Detailed Analysis: 1. Entitlement for Deduction under Section 80P(2)(a)(i): The primary issue revolves around the assessee's claim for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer (AO) denied this deduction on the grounds that the assessee was engaged in banking business, classifying it as a primary co-operative bank, which does not qualify for the deduction under Section 80P(2). The CIT (Appeals) reversed this decision, allowing the deduction based on the judgment of the Hon'ble Karnataka High Court in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha. 2. Classification of the Assessee: The AO classified the assessee as a primary co-operative bank, disqualifying it from the Section 80P(2) deduction. The CIT (Appeals) disagreed, treating the assessee as a co-operative credit society. The Tribunal noted that this classification is crucial as only co-operative societies are eligible for the deduction under Section 80P(2), not co-operatives engaged in banking activities. 3. Validity of Registration under the Karnataka Souharda Sahakari Act, 1997: The Departmental Representative argued that the assessee, registered under the Karnataka Souharda Sahakari Act, 1997, does not qualify as a co-operative society under the Karnataka Co-operative Societies Act, 1959. The Tribunal highlighted the distinction between 'co-operatives' and 'co-operative societies,' emphasizing that only entities registered under the latter are eligible for Section 80P(2) benefits. 4. Reliance on the Decision in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha: The CIT (Appeals) relied on the Karnataka High Court's decision in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha to allow the deduction. The Tribunal noted that this decision is pending appeal before the Supreme Court, which adds complexity to the reliance on this precedent. 5. Applicability of the Supreme Court's Decision in The Citizen Co-operative Society Ltd. vs. ACIT: The Tribunal considered the Supreme Court's decision in The Citizen Co-operative Society Ltd. vs. ACIT, which denied Section 80P(2) deductions to co-operative societies engaged in banking activities. This decision was pivotal in assessing the eligibility of the assessee for the deduction. 6. Deduction of Foreign Tour Expenses: The CIT (Appeals) directed the AO to allow a deduction of ?30,000 for foreign tour expenses, which the AO had added back. The Tribunal did not delve into this issue in detail, as the primary focus was on the eligibility for Section 80P(2) deductions. Tribunal's Decision: The Tribunal set aside the CIT (Appeals) order and restored the matter to the AO for re-examination. The AO was directed to conduct a thorough investigation, considering the legal distinctions between co-operatives and co-operative societies and the implications of the Supreme Court's decision in The Citizen Co-operative Society Ltd. vs. ACIT. The Tribunal emphasized the need for a reasoned and speaking order from the AO after re-examination. Conclusion: The Tribunal allowed the Revenue's appeal for statistical purposes, directing a re-examination of the assessee's eligibility for Section 80P(2) deductions. The AO was instructed to consider all aspects, including the legal status of the assessee's registration and relevant judicial precedents, before making a final determination.
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