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2022 (6) TMI 561 - AT - Income TaxDisallowance of deduction claimed u/s 80P - assessee is a primary Cooperative Bank / Credit Society established under Indian Railway Establishment Manual with the object to increase habit of thrift among its member who are employees of Indian Railways - AO observed that the assessee is neither a primary agriculture cooperative society nor a primary cooperative agriculture and rural development bank but only a Cooperative Bank as per meaning assigned in para v of the Banking Regulation Act, 1949 as such the deduction under section 80P of the Act is not available to the assessee - assessee contended that the assessee Cooperative Bank was formed only for the employees of the Indian Railway and it is being run by the employees of N.E. E.C. Railway employees. HELD THAT - A Cooperative Society qualifies for exemption under section 80P(1) subject to the income from the activity or business activity as provided under sub section (2) of section 80P. The eligibility of the society to claim the exemption under section 80P does not mean that if entire income is exempted as the income from the business activities as provided under various Clause of sub section (2) are only exempted from tax. Therefore, if a society satisfy the condition as provided under sub section (2) under any Clause or sub Clause of Sub Section (2) the deduction is available to it in respect to the income which falls under any of the head provided under this sub section and other income which does not fall in the ambit of sub section (2) would effect the eligibility of the assessee society to claim the deduction so far as the it falls in the ambit of sub section (2). After the insertion of sub section (4) by Finance Act, 2006, deduction under section 80P(1) and (2) shall not be admissible to a Cooperative Bank other than a primary agriculture credit society or a primary Cooperative Agriculture and Rural Development Bank. Deduction u/s 80P shall not be allowable to a Cooperative Bank other than the primary agricultural credit society or a primary co-operative agricultural and rural development bank. The definition of Cooperative Bank is adopted as provided in part V of Banking Regulation Act, 1949 therefore, there is no ambiguity on the point that a Cooperative Bank which is functioning at par with commercial Bank as per the license issued by the Reserve Bank of India it is not eligible for deduction under section 80P of the Income Tax Act because it falls in the mischief of sub section 4 of section 80P. If the definition of Cooperative Bank as provided in Part (V) of Banking Regulation Act, 1949 is taken into consideration then the assessee being a Multi-State Primary Cooperative Bank and not a primary agricultural credit society or a primary co-operative agricultural and rural development bank will fall within the mischief of sub section 4 of section 80P. As it is clear from the byelaws and particularly primary objects and principle business of the assessee that the assessee is not doing any activity falling in the purview of primary agricultural credit society or a primary cooperative agricultural and rural development bank. The assessee is neither providing any agriculture credit facility nor providing any service of rural development bank. The other conditions as provided under Banking Regulation Act, 1949 for the primary Cooperative Bank are also satisfied in case of the assessee and hence, once the assessee falls in the definition of Cooperative Bank, the benefit of deduction under section 80P is not available to the assessee. The decisions relied upon by the assessee are not on the point of Cooperative Bank not eligible for deduction under section 80P but the issue and dispute in those cases were either regarding exemption of interest income under section 80P(2)(a)(i) or the dispute of eligibility of the Cooperative Society for deduction under section 80P but prior to the insertion of sub section (4) by Finance Act, 2006 w.e.f. assessment year 2007-08. Those decisions would not help the case of the assessee. Section 80P is a benevolent provision enacted by the Parliament to increase and promote the growth of cooperative sector in the country. Once a cooperative society is entitled to avail the deduction under section 80P, the amount of profit and gain of business that are attributable to anyone or more activities mentioned in sub section (2) of section 80P shall not be part of the total income of the society. Sub Section 4 is in the nature of proviso to the main provisions contained in section 80P (1) and (2) which specifically excludes cooperative banks; which means a cooperative society having a license from RBI to do a banking business would fall within the mischief of Sub Section (4) section 80(4) and consequently the deduction under section 80P (1) and (2) is not available. Hence, in the facts and circumstances of the case when the assessee is a cooperative society bank as defined as per part V of the Banking Regulation Act, 1949, it is not eligible for deduction under section 80P. - Decided against assessee.
Issues Involved:
1. Whether the CIT(A) was justified in upholding the disallowance of deduction claimed under section 80P of the Income Tax Act. 2. Interpretation and applicability of section 80P(4) of the Income Tax Act to the assessee. 3. The nature and classification of the assessee as a Cooperative Bank under the Banking Regulation Act, 1949. Issue-wise Detailed Analysis: 1. Justification of CIT(A) in Upholding the Disallowance of Deduction under Section 80P: The primary issue in these appeals is whether the CIT(A) was justified in upholding the disallowance of the deduction claimed under section 80P of the Income Tax Act. The assessee, a primary Cooperative Bank/Credit Society established under the Indian Railway Establishment Manual, filed its returns declaring nil income after claiming deductions under section 80P. The Assessing Officer (AO) disallowed these claims, stating that section 80P does not apply to any Cooperative Bank other than a primary agriculture credit society or a primary Cooperative Agriculture and Rural Development Bank. The CIT(A) upheld the AO's decision, leading to the present appeals. 2. Interpretation and Applicability of Section 80P(4) of the Income Tax Act: The AO issued a notice under section 142(1) and, after considering the assessee's response, referred to sub-section 4 of section 80P, inserted by the Finance Act, 2006, effective from the assessment year 2007-08. The AO observed that the assessee, being a Cooperative Bank as per the Banking Regulation Act, 1949, did not qualify for the deduction under section 80P due to the provisions of section 80P(4). The CIT(A) concurred with this interpretation, stating that the assessee is listed as a non-scheduled urban cooperative bank as per the Reserve Bank of India (RBI) website and is thus not eligible for the deduction under section 80P(2)(a)(i). 3. Nature and Classification of the Assessee as a Cooperative Bank: The assessee contended that it is a Cooperative Credit Society, not a primary Cooperative Bank, and thus should be eligible for the deduction under section 80P. However, the AO and CIT(A) noted that the assessee was granted a banking license by the RBI and was functioning as a Cooperative Bank. The CIT(A) referred to the Banking Regulation Act, 1949, which defines a Cooperative Bank and excludes such banks from the benefits of section 80P. The Tribunal upheld this classification, stating that the assessee's activities and the license granted by the RBI confirmed its status as a Cooperative Bank, making it ineligible for the deduction under section 80P. Tribunal's Conclusion: The Tribunal concluded that the assessee, being a Multi-State Primary Cooperative Bank, falls within the mischief of sub-section 4 of section 80P and is thus not eligible for the deduction under section 80P of the Income Tax Act. The Tribunal upheld the orders of the CIT(A) for the assessment years 2009-10, 2013-14, and 2014-15, dismissing the appeals of the assessee. Final Order: The appeals of the assessee for the assessment years 2009-10, 2013-14, and 2014-15 were dismissed, and the order was pronounced on 09/06/2022 at Allahabad, U.P., in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.
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