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2022 (4) TMI 106 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - AO held a conviction that as the assessee was hit by the provisions of Sec. 80P(4) of the Act therefore it was not eligible for claim of deduction under Sec. 80P(2)(a)(i) - HELD THAT - We are of the considered view that as the assessee is a co-operative credit society and not a co-operative bank therefore it would not be hit by the provisions of Sec. 80P(4) of the Act. As the assessee before us is a co-operative credit society and not a co-operative bank therefore it would not be hit by the provisions of Sec. 80P(4) as had been made available on the statute by the Finance Act 2006 w.e.f 01.04.2007. In fact as observed by us hereinabove it is absolutely mandatory for a co-operative society to seek a licence from the Reserve Bank of India to form and operate as a co-operative bank. A perusal of Circular No. 312 of the Reserve Bank of India reveals the process involved for conversion of a co-operative credit society into a primary co-operative bank. Admittedly in the case before us as the assessee being a co-operative credit society is neither authorized nor had undertaken any of the banking business activities as are carried out by a co-operative bank but had only provided financial assistance/credit to its members therefore it can safely be concluded that it cannot be held to be a co-operative bank - we are unable to concur with the view taken by the A.O which thereafter had been sustained by the CIT (Appeals). We thus not finding favor with the view taken by the lower authorities set-aside the order of the CIT(A) and vacate the disallowance made by the A.O. - Appeal of assessee allowed.
Issues Involved:
Interpretation of Sec. 80P(2)(a)(i) of the Income Tax Act, 1961 regarding deduction eligibility for a co-operative credit society engaged in providing credit facilities to its members. Detailed Analysis: Issue 1: Eligibility for Deduction under Sec. 80P(2)(a)(i) The appeal concerns the eligibility of a co-operative credit society for deduction under Sec. 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (A.O) disallowed the claim based on the view that the society was akin to a primary co-operative bank and thus ineligible for the deduction post the Finance Act, 2006 amendment. The A.O's decision was upheld by the CIT (Appeals). Analysis: The A.O's contention was that the society fulfilled the conditions of a primary co-operative bank under Sec.56(c)(ccv) of the Banking Regulation Act, 1949, hence ineligible for the deduction. However, the Tribunal disagreed, citing the wider scope of "attributable to" in Sec. 80P(2)(a)(i) and the judgment in Quepem Urban Credit Society Ltd. case. The Tribunal emphasized that the society's activities were limited to members, not the public, and did not meet the criteria to be classified as a co-operative bank. Issue 2: Classification as Co-operative Bank The primary issue revolves around determining whether the co-operative credit society can be classified as a co-operative bank under the provisions of the Finance Act, 2006, and Sec. 80P(4) of the Income Tax Act, 1961. Analysis: The Tribunal analyzed the definition of "banking" and distinguished between co-operative banks under the Banking Regulations Act, 1949, and co-operative societies under the Co-operative Societies Act. Referring to the judgment in Shri Vardhaman Urban Co-operative Credit Society Ltd. case, the Tribunal concluded that since the society was not recognized as a bank by the Reserve Bank of India, it could not be considered a co-operative bank. Therefore, the Tribunal held that the society's status as a co-operative credit society exempted it from the provisions of Sec. 80P(4). Conclusion: The Tribunal allowed the appeal, setting aside the disallowance made by the A.O and CIT (Appeals). The judgment emphasized the distinction between co-operative credit societies and co-operative banks, ultimately ruling in favor of the society's eligibility for the deduction under Sec. 80P(2)(a)(i) due to its classification as a co-operative credit society and not a co-operative bank.
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