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2020 (10) TMI 1187 - AT - Income TaxDeduction u/s 80P - whether assessee is eligible for deduction u/s.80P(2) and not engaged in banking business? - HELD THAT - As decided in own case 2020 (8) TMI 361 - ITAT CUTTACK Assessee society is eligible for deduction u/s. 80P(2)(a)(i) of the Act and the assessee will get the benefit of Circular issued by the CBDT No. 37/2016, dated 02.11.2016 as quoted above. Since we have allowed the legal ground of assessee, other grounds raised by the assessee on merits are for academic purposes. Thus, appeal of the assessee is allowed on legal ground.
Issues Involved:
1. Withdrawal of appeal for the assessment year 2014-2015. 2. Disallowance of provisions for bad debts, interest, and gratuity for the assessment year 2013-2014. 3. Eligibility for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. 4. Classification of the assessee as a "Cooperative Society" or "Primary Cooperative Bank" under Section 80P(4) of the Income Tax Act, 1961. Detailed Analysis: 1. Withdrawal of Appeal for Assessment Year 2014-2015: At the outset, the assessee requested to withdraw the appeal for the assessment year 2014-2015, which was filed against the order passed by the Pr. CIT, Cuttack. The tribunal allowed this application, and the appeal was dismissed as withdrawn. 2. Disallowance of Provisions for Bad Debts, Interest, and Gratuity for Assessment Year 2013-2014: The assessee challenged the disallowance of provisions for bad debts (?1,36,00,000), interest (?1,36,824), and gratuity (?30,00,000) by the Assessing Officer (AO), which were confirmed by the CIT(A). The tribunal noted that these disallowances were specific to the business of the assessee and resulted in the enhancement of profits. The CBDT Circular No. 37/2016 clarified that disallowances related to business activities against which Chapter VI-A deductions have been claimed result in enhanced profits, making them eligible for deductions. Thus, the tribunal allowed the appeal of the assessee on this ground. 3. Eligibility for Deduction Under Section 80P(2)(a)(i) of the Income Tax Act, 1961: The primary issue was whether the assessee was eligible for deductions under Section 80P(2)(a)(i). The AO had denied this deduction, asserting that the assessee was a "Primary Cooperative Bank" and thus not eligible under Section 80P(4). The CIT(A), however, held that the assessee was a "Cooperative Society" and eligible for the deduction. The tribunal reviewed the case and found that the assessee was not engaged in banking business with the public at large but only provided credit facilities to its members. The tribunal cited previous decisions and the CBDT Circular No. 37/2016, confirming that the assessee was eligible for deductions under Section 80P(2)(a)(i). 4. Classification of the Assessee as a "Cooperative Society" or "Primary Cooperative Bank": The Revenue argued that the assessee should be classified as a "Primary Cooperative Bank" under Section 80P(4), making it ineligible for the deduction under Section 80P(2)(a)(i). The tribunal examined the definitions and conditions under the Banking Regulation Act, 1949, and found that the assessee did not meet the criteria for a "Primary Cooperative Bank" as it did not engage in banking with the general public and did not possess an RBI banking license. The tribunal upheld the CIT(A)'s decision that the assessee was a "Cooperative Society" and eligible for the deduction. Conclusion: The tribunal allowed the appeal of the assessee for the assessment year 2013-2014, confirming its eligibility for deductions under Section 80P(2)(a)(i) and dismissing the Revenue's appeal. The appeal for the assessment year 2014-2015 was dismissed as withdrawn. The tribunal's decision was based on a detailed analysis of the assessee's activities, legal definitions, and applicable circulars and precedents.
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