2015 (6) TMI 409 - AT - Income Tax

Eligibility for deduction u/s. 80P(2)(a)(i) - assessee is a co-operative bank - revision u/s 263 - Held that - As decided in CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot 2015 (1) TMI 821 - KARNATAKA HIGH COURT when the status of the assessee is a co-operative society and not a co-operative bank, the order passed by the AO extending the benefit of exemption from payment of tax 80P(2)(a)(i) of the Act is correct and such an order is not erroneous and therefore, jurisdiction u/s. 263 of the Act cannot be invoked. The Order u/s. 263 insofar as it relates to the deduction u/s. 80P(2)(a)(i) of the Act holding that assessee as a co-operative bank cannot be sustained and is hereby quashed. - Decided in favour of assessee.

Summary

Issues:
1. Interpretation of Section 80P(4) of the Income Tax Act.
2. Applicability of deduction under Section 80P(2)(a)(i) to cooperative societies.
3. Comparison between cooperative banks and cooperative societies for tax purposes.

Analysis:
1. The case involved the interpretation of Section 80P(4) of the Income Tax Act, which excludes certain entities from claiming deductions under Section 80P. The dispute arose as to whether the assessee, a cooperative society, fell under the ambit of this exclusion provision meant for cooperative banks. The Tribunal clarified that Section 80P(4) applies only to cooperative banks as defined in Part V of the Banking Regulation Act, 1949, and not to cooperative societies. This distinction was crucial in determining the eligibility of the assessee for the deduction under Section 80P(2)(a)(i).

2. The Tribunal analyzed the nature of business and regulatory requirements for cooperative banks and cooperative societies to differentiate between the two entities. It highlighted that cooperative banks, unlike cooperative societies, have specific privileges and obligations under the Banking Regulation Act, such as providing various banking services and adhering to RBI regulations. The Tribunal emphasized that the legislative intent behind Section 80P(4) was to align cooperative banks with commercial banks, indicating that cooperative societies were not intended to be excluded from claiming deductions under Section 80P(2)(a)(i).

3. The comparison between cooperative banks and cooperative societies elucidated the distinct features governing their operations, registration, nature of business, filing of returns, and regulatory oversight. The Tribunal referred to relevant legal provisions and a CBDT circular to support its conclusion that the exclusion under Section 80P(4) was specifically tailored for cooperative banks and did not encompass cooperative societies. Additionally, the Tribunal cited precedents and a High Court judgment to reinforce the position that cooperative societies, when not functioning as banks, were entitled to the deduction under Section 80P(2)(a)(i).

4. Ultimately, the Tribunal ruled in favor of the assessee, a cooperative society, by quashing the order of the CIT that incorrectly classified it as a cooperative bank ineligible for the deduction under Section 80P(2)(a)(i). The decision underscored the importance of accurately interpreting the statutory provisions and differentiating between cooperative banks and cooperative societies for tax assessment purposes. The judgment provided clarity on the scope of Section 80P and affirmed the entitlement of cooperative societies to claim deductions in accordance with the law.