2015 (9) TMI 177 - AT - Income Tax

Denial of deduction made by the Society U/s 80P(2)(a)(i) - Held that - After going through the case laws cited by the assessee as well as byelaws of society, revealed that the assessee is not a cooperative bank but cooperative society. The exclusive provision to Sub-section (4) of Section 80P is not applicable in the case of the assessee. The department itself has allowed deduction U/s 80P(2)(a)(i) of the Act in A.Y. 2007-08, which has not been reopened U/s 148 and no order U/s 263 was passed by the department. The ld Dr had not brought on record any evidence that in preceding year, the Assessing Officer s order in A.Y. 2007-08 had not been accepted by the department. By respectfully following the decision of Hon ble Gujarat High Court in the case of CIT Vs. Jafari Momin Vikas Cooperative Credit Society Ltd.(2014 (2) TMI 28 - GUJARAT HIGH COURT) on identical issue, we hold that the assessee is a cooperative society not a cooperative bank and is entitled for deduction U/s 80P(2)(a)(i) of the Act. - Decided in favour of assessee.

Summary

Issues involved:
1. Denial of deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act.
2. Charging of interest under Sections 234A, 234B, 234C, and 234D of the Act and withdrawal of interest under Section 244A.

Analysis:

Issue 1: Denial of deduction claimed under Section 80P(2)(a)(i) of the Income Tax Act:
The appellant, a society engaged in banking, claimed a deduction under Section 80P for the income earned during the relevant assessment year. The Assessing Officer denied the deduction citing that the appellant did not qualify as a primary agricultural credit society or a primary cooperative agricultural and rural development bank as per the provisions of Section 80P(4) of the Act. The Assessing Officer concluded that the appellant did not meet the criteria for either category, based on the nature of its operations and membership structure. The CIT(A) upheld the Assessing Officer's decision based on a similar case from a previous assessment year. However, the appellant argued that it was a cooperative society providing credit facilities to its members and not a cooperative bank, thus qualifying for the deduction under Section 80P(2)(a)(i). The appellant relied on various legal precedents and interpretations to support its claim. The ITAT, after considering the arguments and relevant case laws, held that the appellant was indeed a cooperative society and entitled to the deduction under Section 80P(2)(a)(i) of the Act. The ITAT also noted that the department had allowed the deduction in a previous assessment year without contest, further supporting the appellant's position.

Issue 2: Charging of interest under Sections 234A, 234B, 234C, and 234D of the Act:
The second ground of appeal raised by the appellant was against the charging of interest under various sections of the Act. Since the first issue regarding the deduction under Section 80P was decided in favor of the appellant, the ITAT directed the Assessing Officer to reconsider the decision on charging interest in light of the allowed deduction. The ITAT did not delve into the specifics of this issue but instructed the Assessing Officer to take appropriate action in accordance with the law.

In conclusion, the ITAT allowed the appellant's appeal, holding that the appellant, being a cooperative society and not a cooperative bank, was entitled to the deduction under Section 80P(2)(a)(i) of the Act. The ITAT also directed the Assessing Officer to address the issue of charging interest in line with the decision on the deduction.