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2021 (12) TMI 513 - HC - Income TaxDeduction u/s 80P - HELD THAT - As in assessee's own case 2016 (5) TMI 1164 - KERALA HIGH COURT this Court has considered the standing of the assessee vis-a-vis Section 80P(2) of the Act and denied the claim for deduction as a Co-operative Society. The said judgment is in appeal before the Supreme Court. In Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT from the paragraphs excerpted above, it is argued by refering to additional details, brought on record that the assessee is entitled to the claim as Co-operative Society registered under the Kerala Co-operative Societies Act, 1969 and merits acceptance of its claim for deduction under Section 80P(2) of the Act. There is consensus in the arguments of both sides that even for applying the principle of Mavilayi Service Cooperative Bank Ltd. case, independent of the judgment a few details are examined, a finding recorded and then the principle laid down in Mavilayi Service Co-operative Bank Ltd. case could be applied. We are of the view that instead of following the assessee's own case and dismissing the appeals of the assessee or alternatively follow Mavilayi Service Co-operative Bank Ltd. without examination of a few details and grant the status of Society for enabling the assessee for deduction under Section 80P(2), the matter requires to be reconsidered by the Tribunal. These questions could be answered in favour of the assessee to the limited extent that the matter requires reconsideration by the Tribunal on the claim of assessee as a Co-operative Society and the entitlement to deduction under Section 80P(2) of the Act. The assessee and the Department are given liberty to place additional materials, now brought on record in the appeals before the Tribunal for decision and consideration.
Issues Involved:
1. Entitlement of the assessee to deduction under Section 80P(2) of the Income Tax Act, 1961. 2. Classification of the assessee as a 'co-operative bank' or 'co-operative society'. 3. Deduction of contributions made to Staff Retirement Benefit Fund under Section 37 of the Act. 4. Disallowance under Section 40A(9) of the Act. 5. Contradiction in Tribunal's decision regarding deduction under Section 80P(2)(a)(i). 6. Applicability of the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. case. Detailed Analysis: 1. Entitlement of the Assessee to Deduction under Section 80P(2) of the Income Tax Act, 1961: The primary issue revolves around whether the assessee is entitled to claim deduction under Section 80P(2) of the Income Tax Act, 1961. The Tribunal and the authorities had disallowed this claim, leading to the appeals by the assessee. The Tribunal had remanded the matter to the Assessing Officer for consideration of the assessee's entitlement for deduction as a rural land development bank. The High Court noted that the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax, which considered the scope and applicability of Section 80P, was heavily relied upon by the assessee to claim the deduction. 2. Classification of the Assessee as a 'Co-operative Bank' or 'Co-operative Society': The Tribunal had treated the assessee as a 'co-operative bank' and denied the benefit under Section 80P(2)(a)(i) of the Act. The assessee argued that they do not fall within the definition of a 'co-operative bank' as per the Banking Regulation Act, 1949, and should instead be classified as a 'State Land Development Bank' or a 'Co-operative Credit Society'. The High Court acknowledged the need to reconsider this classification, especially in light of additional details provided by the Reserve Bank of India and the National Bank for Agricultural and Rural Development Act, 1981. 3. Deduction of Contributions Made to Staff Retirement Benefit Fund under Section 37 of the Act: The assessee contended that the contributions made to the Staff Retirement Benefit Fund, which is a special fund set up for the welfare of employees and approved by the Registrar of Cooperative Societies, should be allowed as a deduction under Section 37 of the Act. The Tribunal had denied this deduction, and the High Court did not provide a conclusive ruling on this matter, implying that it requires further examination. 4. Disallowance under Section 40A(9) of the Act: The issue of whether a disallowance under Section 40A(9) of the Act, leading to additions in the "profits of business," is susceptible to taxation independently if the assessee is entitled to a complete deduction of income from "Profit of business" available to a cooperative society under Section 80P of the Act was raised. The High Court did not provide a direct ruling on this matter, suggesting that it should be reconsidered by the Tribunal. 5. Contradiction in Tribunal's Decision Regarding Deduction under Section 80P(2)(a)(i): The Revenue argued that the Tribunal's decision was contradictory as it denied the assessee's claim for deduction under Section 80P(2)(a)(i) but granted relief under the same section as a State Development Bank. The High Court acknowledged this contradiction and highlighted the need for a comprehensive adjudication by the Tribunal. 6. Applicability of the Supreme Court's Decision in Mavilayi Service Co-operative Bank Ltd. Case: The High Court extensively referred to the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd., which clarified the scope and applicability of Section 80P(2)(a)(i) and Section 80P(4). The High Court emphasized that the principle laid down in this case should be applied to determine the assessee's entitlement to deduction under Section 80P(2), provided additional details are examined and a finding is recorded. Conclusion: The High Court set aside the orders under appeal and remitted the matter to the Tribunal for reconsideration. The Tribunal is directed to re-examine the classification of the assessee, the entitlement to deduction under Section 80P(2), and other related issues, taking into account the additional details and the principles laid down in the Mavilayi Service Co-operative Bank Ltd. case. The appeals by both the assessee and the Revenue are to be adjudicated afresh by the Tribunal.
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