2023 (5) TMI 372 - SCH - Income Tax

Deduction u/s 80P - HC 2019 (10) TMI 1557 - BOMBAY HIGH COURT said Tribunal is justified allowing assessee claim on the ground that the assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) - Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan - HELD THAT - As required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also. There are concurrent findings recorded by CIT-A, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under Section 80(P)(2) of the Income Tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. On merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act. Decided in favour of assessee.

Summary

Issues:
The issue involved in the present appeal is whether the respondent, a co-operative credit society, falls under the definition of a bank for the purpose of Section 80P(4) of the Income Tax Act.

The Supreme Court considered the question of law regarding the classification of the respondent as a Co-operative Bank under Section 80P(4) of the Income Tax Act. The Court noted that the primary Agricultural Credit Societies cannot be termed as Co-operative Banks under the Banking Regulation Act, based on a previous decision. The Court emphasized the distinction between credit societies and banks in terms of their activities and held that the respondent, being a credit society, is entitled to exemption under Section 80(P)(2) of the Income Tax Act. The Court found that the respondent cannot be classified as a Co-operative Bank based on the nature of its activities and the definition of a bank under the Banking Regulation Act.

The Court upheld the concurrent findings of the Commissioner of Income Tax Appeals, the Income Tax Appellate Tribunal, and the High Court, which determined that the respondent cannot be considered a bank or a cooperative bank. The Court emphasized that the respondent, as a credit society, is eligible for exemption under Section 80(P)(2) of the Income Tax Act. The Court stated that such factual findings should not be disturbed by the Court under Article 136 of the Constitution of India. Additionally, considering the CBDT Circulars and the definition of a bank under the Banking Regulation Act, the Court concluded that the respondent does not qualify as a Co-operative Bank or a Bank under Section 80(P)(4) and is entitled to the benefits under Section 80(P)(2) of the Income Tax Act.

Therefore, the Supreme Court dismissed the appeal, ruling in favor of the Assessee and against the Revenue. The Court held that the respondent, being a credit society, is not classified as a Co-operative Bank or Bank under the relevant provisions, and is entitled to the exemption under Section 80(P)(2) of the Income Tax Act. The appeal was dismissed with no costs awarded.