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2024 (5) TMI 1015 - AT - Income TaxDeduction claim u/s 80P - Affect of notification issued under sub-Section (1) of Section 60 or Section 60A of the repealed Act - assessee co- operative society claimed exemption under Notification No. SRO 992 dated 22.12.1950 of the Income Tax Act, 1922 which was repealed by IT Act, 1961 - Parliament has introduced Section 80P to deal with the taxation of Cooperative Societies, and therefore, SRO 1800 would no more be applicable in respect of deduction / exemption of income of Co-operative Societies - whether the assessee is eligible for claiming exemption in terms of the aforesaid Notification No. SRO 1800, despite introduction of Section 80P of the Act, which has been specifically incorporated to deal with deduction to co-operative societies? HELD THAT - We are unable to agree with the fine distinction sought to be drawn by the counsel for the assessee with regards the fact that the Notification No. SRO 1800 was an exemption provision, while Section 80P of the Act, as a deduction provision and therefore, since Section 80P of the Act deals with deduction relating to income of cooperative societies, and Notification No. SRO 1800 being an exemption provision they operate in different realms and SRO 1800 continues to co-exist alongwith the provisions of Section 80P of the Act. Whether in view of the introduction of Section 80P of the Act, Notification No. SRO 1800 stands withdrawn, in view of the language of Section 297 of the Act? - As held in the case of Ramanath and Company 2020 (6) TMI 158 - SUPREME COURT deduction/exemption/rebate provisions are all falling in the same category, being incentive/beneficial provisions. Therefore, Notification No. SRO 1800, issued under sub-Section (1) of Section 60 or Section 60A , in our considered view, stands effectively superseded by the provisions of Section 80P of the Act, and there is no specific requirement for a formal withdrawal of such notification. Section 297(2)(l) of the Act contains a clear cut wording that once a specific provision has been introduced to deal with a specific head of income, then any notification issued under Section 60/60A under the repealed Act shall not continue to remain in force. The specific omission of the words until rescinded by the Central Government omitted w.e.f. 09.09.1972 also lends support to the fact that no specific notification withdrawing the erstwhile Notification No. SRO 1800 is required, once Section 80P has been introduced specifically to deal with deduction relating to taxability of income earned by cooperative societies. The proviso to Section 297(2)(l) of the Act is only classificatory in nature and only recognises that the Central Government has inherent powers to rescind any Notification. However, as discussed in the foregoing paragraphs, in view of the plain language of Section 297(2)(l) of the Act, once a specific provision has been introduced to deal with the taxability of income of cooperative societies in the form of Section 80P of the Act, then to that extent any notification issued under the erstwhile Section 60/60A of the repealed Act, would not continue to operate. Accordingly, in view of decision rendered in the case of Shri Gopal Gram Seva Sahakari Mandli Ltd. 2014 (12) TMI 766 - GUJARAT HIGH COURT income of the assessee trust shall be governed by the provisions of Section 80P of the Act. Further, we also observe that on merits, the assessing officer has given a detailed finding that the assessee is not having any objects which would confirm the provisions of Section 80P of the Act and further, the assessee is also not earning any income from its members, but from third parties and therefore, the assessee is not eligible for claim of benefit under Section 80P - Assessee appeal dismissed.
Issues Involved:
1. Validity of the order passed by Ld. CIT(A) u/s 250 of the I.T. Act. 2. Disallowance of exemption of income for a registered co-op society. 3. Confirmation of addition into taxable income despite the concept of mutuality. 4. Disallowance of deduction claim u/s 80P of the Income Tax Act, 1961. 5. Applicability of Notification No. SRO 1800 post the introduction of Section 80P. Summary: 1. Validity of the order passed by Ld. CIT(A) u/s 250 of the I.T. Act: The assessee challenged the order passed by the Ld. CIT(A) u/s 250 of the I.T. Act, claiming it to be ab initio void and bad in law. 2. Disallowance of exemption of income for a registered co-op society: The assessee, a registered co-op housing society, claimed exemption of income based on its registration and the concept of mutuality. The AO observed that the assessee earned rental income from FDs with banks and was effectively doing business, not distributing income among members, thus disallowing the exemption. 3. Confirmation of addition into taxable income despite the concept of mutuality: The Ld. CIT(A) confirmed the addition into taxable income, not appreciating the mutuality concept. The AO noted that the assessee's income was not distributed among members, failing the mutuality test. 4. Disallowance of deduction claim u/s 80P of the Income Tax Act, 1961: The assessee claimed that its income was exempt under the old Income Tax Act and Notification No. SRO 1800. The AO, supported by the Ld. DR, argued that Section 80P now governs the taxation of cooperative societies, rendering SRO 1800 inapplicable. 5. Applicability of Notification No. SRO 1800 post the introduction of Section 80P: The Tribunal examined whether Notification No. SRO 1800 continues to be operative post the introduction of Section 80P. The Tribunal relied on the Gujarat High Court decision in CIT v. Shri Gopal Gram Seva Sahakari Mandli Ltd., which held that claims must be decided according to Section 80P, and the old notification is not applicable. The Supreme Court in Ramnath & Co. v. CIT also supported this view, stating that exemption/deduction provisions are forms of tax incentives and should be interpreted accordingly. Conclusion: The Tribunal concluded that the assessee's income should be governed by Section 80P of the Act. The AO's detailed findings showed that the assessee did not meet the criteria for Section 80P benefits, as it did not earn income from its members but from third parties. Therefore, the appeal was dismissed. Order Pronouncement: This Order was pronounced in Open Court on 20/05/2024.
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