2018 (12) TMI 128 - HC - Income Tax

Deduction u/s 80-P(2) and 80- P(2)(c)(ii) - income from the sale of Public Distribution System sales as directed by the Government of Tamil Nadu - Held that - Following the decision in the assessee s own case for the earlier Assessment year 2011 (7) TMI 1341 - ITAT CHENNAI , this Appeal is allowed and the above tax case appeal is allowed, the orders passed by the Authorities below are set aside and the substantial question of law framed is answered in favour of the assessee. The Assessing Officer is directed to extend the benefit of deduction under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act to the appellant/assessee. - Decided in favour of assessee

Summary

Issues:
Interpretation of Income Tax Act - Deduction under Section 80P(2) and 80-P(2)(c)(ii) for income from the sale of Public Distribution System sales as directed by the Government of Tamil Nadu.

Detailed Analysis:

1. Background:
The appeal was filed against the order passed by the Income Tax Appellate Tribunal Madras 'B' Bench regarding the Assessment year 2007-08.

2. Substantial Question of Law:
The primary issue revolved around whether the income from the sale of Public Distribution System sales, as directed by the Government of Tamil Nadu, is eligible for deduction under Section 80P(2) and 80-P(2)(c)(ii) of the Income Tax Act, 1961.

3. Precedent Case:
The Division Bench considered a similar issue in the assessee's case for the Assessment Year 2005-06, where the Substantial Question of Law was decided in favor of the assessee.

4. Arguments and Contention:
The assessee contended that the income from Public Distribution System sales should be eligible for deduction under Section 80P(2)(a) of the IT Act, citing provisions of the TNCS Act, 1983.

5. Tribunal and CIT (A) Decision:
The CIT (A) rejected the assessee's contention, leading to an appeal to the Tribunal, which concurred with the CIT (A)'s view, questioning the connection of the income to banking activities.

6. Judicial Analysis:
The Court analyzed the By-laws of the society, directives from the Government, and submissions made by the assessee to determine the eligibility for deduction under Section 80P(2) of the IT Act.

7. Interpretation of TNCS Act, 1983:
The TNCS Act, 1983 defines a 'credit society' to include activities beyond lending, based on government notifications, strengthening the assessee's position.

8. Legal Precedent:
Reference was made to a Bombay High Court case, emphasizing the broad interpretation of 'banking' activities, supporting the exemption under Section 80P(2)(a)(i) of the IT Act.

9. Conclusion:
The Court held that the assessee's activity fell within the scope of a 'credit society' as defined under the TNCS Act, 1983, and directed the Assessing Officer to allow the deduction under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act to the appellant/assessee.

10. Final Decision:
The appeal was allowed, setting aside the orders of the lower authorities, and the substantial question of law was answered in favor of the assessee, directing the Assessing Officer to grant the deduction under the relevant sections of the IT Act.

This detailed analysis of the judgment highlights the key legal interpretations and arguments considered in the case regarding the eligibility of deduction under the Income Tax Act for income from Public Distribution System sales.