2012 (7) TMI 547 - AT - Income Tax

Exemption under section 80P(2) (a) (i) of the Income Tax Act - interest received from the members of the society Held that - Tribunal was required to examine the memorandum of association, the articles of association, the return of income filed with the Department, the status of business indicated in such returns, etc - parties not brought on record copy of Memorandum of Association and Articles of Association of the assessee-society nor produced copy of returns as filed by the assessee nor the relevant audit reports - issue requires verification of records and therefore, the issue should be restored to the file of the Assessing Officer for proper verification - matter remanded back to the file of the Assessing Officer - appeal of revenue is allowed for statistical purposes.

Summary

Issues:
- Allowance of deduction under Section 80P(2)(d)
- Allowance of deduction under Section 80P(2)(a)(i)

Analysis:
1. The appeal filed by the Revenue challenged the order of the Commissioner of Income Tax (Appeals) regarding the allowance of deduction under Section 80P(2)(d) for a Co-operative Society engaged in banking or providing credit facility to its members. The Revenue contended that the deduction should be based on net interest receipts, not gross interest receipts. The Commissioner allowed the deduction based on the decision of the Hon'ble Madras High Court in a previous case. The Tribunal upheld the Commissioner's decision, leading to further appeal to the Madras High Court.

2. The case involved the deduction under Section 80P(2)(a)(i) for interest earned on advances to members. The Assessing Officer disallowed the deduction citing the Department's non-acceptance of the High Court's decision in a previous year. However, the Commissioner, following the High Court's decision, allowed the deduction, which was upheld by the Tribunal. The matter was then appealed to the Madras High Court, which remitted the case back to the Tribunal in light of a Supreme Court decision in a related case.

3. The Madras High Court directed the Tribunal to examine the Memorandum of Association, Articles of Association, and other relevant documents to determine if the Co-operative Society was engaged in activities qualifying for the deduction under Section 80P(2). As the necessary documents were not produced before the Tribunal, the case was remitted back to the Assessing Officer for fresh adjudication following the Supreme Court's guidelines. The Tribunal, respecting the precedent, set aside the lower authorities' orders and remitted the case back to the Assessing Officer for proper verification and consideration in line with the Supreme Court's decision.

4. Ultimately, the appeal of the Revenue was allowed for statistical purposes, and the case was remitted back to the Assessing Officer for a fresh adjudication based on the relevant documents and legal principles outlined by the higher courts.