2016 (5) TMI 627 - AT - Income Tax

Deduction under sec. 80P(2)(a)(i) - claim of the assessee for deduction under sec. 80P(2)(a)(i) was rejected by AO on the ground that the assessee was a cooperative bank, and hence, not entitled to claim deduction by virtue of sec. 80P(4) - Held that - The Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the decision in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT 2015 (6) TMI 573 - BOMBAY HIGH COURT wherein held that the contention of revenue that the appellant is not entitled to the benefit of Section 80P (2)(a)(i) of the Act in view of the fact that it deals with non-member cannot be upheld. This for the reason that section 80P(1) of the Act restricts the benefits of deduction of income of co-operative society to the extent it is earned by providing credit facilities to its members. Therefore, to the extent the income earned is attributable to dealings with the non-members are concerned the benefit of Section 80P of the Act would not be available. Thus restrict the benefit of deduction under section 80P of the Act only to the extent that the same is earned by the appellant in carrying on its business of providing credit facilities to its members.

Summary

Issues involved: Appeals by Revenue and Cross Objections by assessee against orders of Commissioner of Income Tax (Appeals) regarding deduction under sec. 80P(2)(a)(i) of the Income Tax Act, 1961.

Comprehensive Analysis:

1. Main Issue - Deduction under sec. 80P(2)(a)(i):
- The case involved the denial of deduction under sec. 80P(2)(a)(i) by the Assessing Officer to the assessee, a Cooperative Society, on the grounds of being a cooperative bank and thus excluded under sec. 80P(4).
- The Commissioner of Income Tax (Appeals) allowed the claim of the assessee based on the interpretation that the society did not meet the criteria of a Primary Cooperative Bank as defined in the Banking Regulation Act.
- The Commissioner's decision was supported by the Hon'ble High Court's judgment in a similar case, emphasizing that the appellant was not a Primary Cooperative Bank and thus entitled to the deduction under sec. 80P(2)(a)(i).
- The Departmental Representative failed to identify any errors in the Commissioner's orders and could not provide contrary decisions, leading to the confirmation of the Commissioner's decision by the Appellate Tribunal.

2. Cross Objections Dismissal:
- The Cross Objections filed by the assessee were dismissed due to a delay of 20 days without providing reasons for condonation, resulting in their dismissal.

3. Final Decision:
- The Appellate Tribunal confirmed the Commissioner's decision to allow the deduction under sec. 80P(2)(a)(i) to the assessee, based on the interpretation of the society not being a Primary Cooperative Bank.
- The appeals by the Revenue and Cross Objections by the assessee were both dismissed by the Tribunal, upholding the Commissioner's orders.

In conclusion, the judgment revolved around the eligibility of the assessee, a Cooperative Society, for deduction under sec. 80P(2)(a)(i) of the Income Tax Act. The decision was based on the distinction between a cooperative bank and a Primary Cooperative Bank as defined in the Banking Regulation Act, with the Tribunal ultimately confirming the allowance of the deduction to the assessee based on the specific criteria and legal interpretations presented in the case.