2014 (2) TMI 28 - HC - Income Tax

Deduction under section 80P(2)(a)(i) - Held that - As per CBDT Circular No. 133 of 2007 dated 9.5.2007 - Sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank - The respondent assessee is not a credit co-operative bank but a credit co-operative society - Exclusion clause of sub-section(4) of section 80P would not apply to it - Decided against Revenue.

Summary

Issues: Interpretation of sections 80P(2) and 80P(4) of the Income Tax Act, 1961

Analysis:
The judgment revolves around the interpretation of sections 80P(2) and 80P(4) of the Income Tax Act, 1961. The primary issue is whether a Cooperative Credit Society is entitled to deduction under section 80P(2)(a)(i) despite the provisions of section 80P(4) rws 2(24) (viia) excluding certain cooperative banks from such benefits. The Respondent, a Cooperative Credit Society, claimed the deduction under section 80P(1) based on the activities specified in section 80P(2)(a)(i) related to banking or providing credit facilities to its members. The Revenue contended that the newly inserted section 80P(4) restricted the application of section 80P to exclude the Respondent. The crux of the matter lies in the interpretation of the exclusion clause in section 80P(4) and its impact on entities like the Respondent Cooperative Credit Society.

The Assessing Officer initially denied the deduction under section 80P to the Respondent based on section 80P(4). However, both the CIT(Appeals) and the Tribunal overturned this decision, emphasizing that the Respondent, not being a bank, should not fall under the exclusion provided in section 80P(4). The Tribunal's decision was based on the premise that the Respondent did not meet the criteria of a "primary agricultural credit society." This interpretation led to a conflict regarding the applicability of the exclusion clause in section 80P(4) to entities like the Respondent Cooperative Credit Society.

The judgment further delves into the legislative intent behind the wording of section 80P(4) and the significance of including specific entities like "primary agricultural credit society" in the exclusion clause. The Court contemplated the complexity of the statutory provisions but ultimately found clarity in a CBDT circular issued in 2007. The circular clarified that entities not falling under the definition of a "Co-operative Bank" as per the Banking Regulation Act, 1949, would not be subject to the exclusion under section 80P(4). This clarification directly addressed the issue at hand, confirming that entities like the Respondent, which are credit cooperative societies and not cooperative banks, are eligible for the deduction under section 80P.

In conclusion, the Court dismissed the Revenue's argument that section 80P(4) would exclude not only cooperative banks but also credit societies that are not cooperative banks. The judgment affirmed that the exclusion clause in section 80P(4) does not apply to entities like the Respondent Cooperative Credit Society, which are not cooperative banks but credit cooperative societies. Therefore, the Tax Appeals were dismissed in favor of the Respondent, upholding their entitlement to the deduction under section 80P.