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2024 (6) TMI 1270 - AT - Income TaxIssues Involved: 1. Legality of the intimation order under Section 143(1)(a) of the Income Tax Act, 1961. 2. Disallowance of deduction under Section 80P(2)(d) of the Income Tax Act, 1961. 3. Interpretation of co-operative banks versus co-operative societies under the Karnataka Co-operative Societies Act, 1959. 4. Procedural fairness and natural justice in the denial of deduction claims. Detailed Analysis: 1. Legality of the Intimation Order under Section 143(1)(a): The appellant contended that the intimation order under Section 143(1)(a) and the subsequent confirmation by the Commissioner of Income Tax (Appeals) were "bad in law and against the provisions of the law and judicial precedence." The Tribunal reviewed the procedural aspects and found that the return was processed by the Centralized Processing Center (CPC) which disallowed the deduction under Section 80P(2)(d) and determined the taxable income. The Tribunal did not find any procedural irregularities in the issuance of the intimation order. 2. Disallowance of Deduction under Section 80P(2)(d): The primary issue was the disallowance of the deduction claimed by the assessee under Section 80P(2)(d) of the Income Tax Act, 1961. The assessee argued that the interest received from fixed deposits in co-operative banks should be eligible for deduction as co-operative banks are essentially co-operative societies. The Tribunal examined the relevant legal provisions and judicial precedents, including the Supreme Court judgment in Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer, which clarified the distinction between co-operative banks and co-operative societies. The Tribunal noted that the interest received from co-operative banks, which are registered as co-operative societies but operate under RBI regulations, is not eligible for deduction under Section 80P(2)(d). 3. Interpretation of Co-operative Banks versus Co-operative Societies: The Tribunal discussed the interpretation of co-operative banks and co-operative societies under the Karnataka Co-operative Societies Act, 1959. The Tribunal referred to the Supreme Court's detailed examination of the definitions and concluded that a co-operative bank, even if registered under the Co-operative Society Act, is distinct from a co-operative society that does not engage in banking activities as defined under the Banking Regulation Act, 1949. Therefore, the interest income from co-operative banks does not qualify for deduction under Section 80P(2)(d). 4. Procedural Fairness and Natural Justice: The appellant argued that the CPC and the Commissioner of Income Tax (Appeals) failed to provide proper intimation and opportunity to contest the disallowance, violating the principles of natural justice. The Tribunal acknowledged the procedural lapse but noted that the Commissioner of Income Tax (Appeals) had provided an opportunity to the appellant to explain their case during the appellate proceedings. The Tribunal emphasized the need for procedural fairness and directed the Assessing Officer to provide a reasonable opportunity to the assessee during the remand proceedings. Conclusion: The Tribunal remitted the issue back to the Assessing Officer to determine whether the interest received by the assessee was from co-operative societies or co-operative banks as per the Supreme Court's guidelines. The Assessing Officer was directed to provide a reasonable opportunity to the assessee for presenting requisite documents. The appeal by the assessee was allowed for statistical purposes, emphasizing procedural fairness and adherence to judicial precedents. Pronouncement: The judgment was pronounced in the open court on January 17, 2024.
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