2017 (12) TMI 1049 - AT - Income Tax

Exemption u/s 80P(2)(a)(i) - whether or not the activities of the assessee are confined to its members so as to fall within the provisions of Sec. 80P(2)(a)(i) - Held that - Pertinently, Sec. 80P(2)(a)(i) of the Act, so far as is relevant for the present case, deals with exemption with regard to the income earned by co-operative society from providing credit facilities to its members. The aforesaid was put to the learned representative for the assessee who submitted that the assessee had no objection if the matter is restored back to the file of the Assessing Officer for proper verification on this aspect. We, therefore, in view of the aforesaid discussion, set-aside the order of the CIT(A) and direct the Assessing Officer to examine and consider as to whether or not the assessee s activities are in compliance with the Maharashtra State Co-operative Act, 1960 as also the Maharashtra State Co-operative Regulations, 1961. If it is so found, then, in the absence of any licence from the Reserve Bank of India, the assessee cannot be treated as an entity falling within the restrictions imposed in Sec. 80P(4). So however, if the findings of the Assessing Officer are to the contrary, he shall be free to take appropriate action as per law.

Summary

Issues involved:
- Interpretation of Sec. 80P(2)(a)(i) of the Income Tax Act, 1961 for exemption claim.
- Assessment of activities of a co-operative credit society under the Maharashtra State Co-operative Act, 1960.
- Determination of eligibility for exemption u/s 80P(2)(a)(i) based on compliance with regulatory requirements and licensing.

Detailed Analysis:
1. The judgment involves the interpretation of Sec. 80P(2)(a)(i) of the Income Tax Act, 1961 regarding the exemption claim by a co-operative credit society. The primary issue revolves around whether the activities of the assessee qualify for the exemption under this section based on the nature of services provided to its members, specifically related to providing credit facilities.

2. The assessment of the activities of the co-operative credit society under the Maharashtra State Co-operative Act, 1960 is crucial in determining the eligibility for the claimed exemption. The case highlights the importance of compliance with the regulatory framework and adherence to the provisions of the Co-operative Act to ascertain the nature of operations conducted by the society.

3. The judgment also delves into the significance of possessing a license from the Reserve Bank of India for entities engaging in banking activities. The absence of such a license impacts the classification of the co-operative society and its eligibility for exemption under Sec. 80P(2)(a)(i) of the Act. The decision emphasizes the need for entities to meet the specified criteria and regulatory requirements to avail tax benefits.

4. The detailed analysis of the case includes references to legal precedents, such as the judgment of the Hon'ble Supreme Court in a similar case, to support the conclusions drawn regarding the nature of the activities carried out by the co-operative credit society. The judgment underscores the importance of factual findings and adherence to legal principles in determining the applicability of tax exemptions to entities operating in the financial sector.

5. The judgment highlights the role of the Assessing Officer in conducting a thorough examination of the activities of the assessee to ensure compliance with relevant laws and regulations. The decision instructs the Assessing Officer to verify whether the society's operations align with the provisions of the Co-operative Act and the regulatory framework, emphasizing the need for a fair and comprehensive assessment process.

6. Overall, the judgment provides a detailed analysis of the legal and regulatory aspects concerning the exemption claim under Sec. 80P(2)(a)(i) of the Income Tax Act, emphasizing the importance of adherence to statutory requirements and regulatory provisions for entities seeking tax benefits. The decision reflects a meticulous approach towards evaluating the eligibility of co-operative credit societies for tax exemptions based on their operational activities and compliance with relevant laws.