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2019 (11) TMI 636 - AT - Income TaxDeduction u/s 80P - amount invested in Cooperative and other Banks - HELD THAT - Definition of member given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member, associate member and sympathizer member and there is no distinction made between duly registered member and nominal, associate and sympathizer member. Therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd. 2012 (9) TMI 288 - ITAT, PUNE and following the same hold that the assessee is eligible for deduction u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e., Cooperative Banks and other Banks. I am further of the view that in the present case, the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. 2019 (1) TMI 116 - MADRAS HIGH COURT would be applicable. Therefore following the ratio of the decisions cited herein above and the decision of Hon ble Bombay High Court hold that assessee is eligible for deduction u/s 80P - Decided in favour of the assessee
Issues Involved:
1. Eligibility of the Assessee Co-operative Society for deduction under Section 80P of the Income Tax Act, 1961. 2. Denial of deduction under Section 80P by the Assessing Officer and CIT(A). 3. Classification of the Assessee as a Co-operative Bank. 4. Investment of surplus funds in Co-operative Banks and its impact on eligibility for deduction under Section 80P. Issue-wise Detailed Analysis: 1. Eligibility of the Assessee Co-operative Society for Deduction under Section 80P of the Income Tax Act, 1961: The Assessee, a registered cooperative society under the Maharashtra Co-operative Society Act, 1960, claimed a deduction of ?16,66,531/- under Section 80P of the Act for the Assessment Year 2015-16. The primary business of the Assessee was providing credit facilities to its members. The Tribunal referred to the case of Sai Prerana Gramin Bigarsheti Sahakari Pat Sanshta Maryadit, where a similar issue was adjudicated in favor of the assessee, confirming that the Assessee Co-operative Society is eligible for deduction under Section 80P. 2. Denial of Deduction under Section 80P by the Assessing Officer and CIT(A): The Assessing Officer denied the deduction under Section 80P, stating that the Assessee was acting like a regular bank by accepting deposits from non-members and nominal members, thus violating the bye-laws of the society. The CIT(A) upheld this decision, relying on the Hon’ble Supreme Court’s judgment in Citizen Co-operative Society Ltd. vs. ACIT, which recognized two kinds of members and held that the Assessee did not qualify as a cooperative bank and invoked the provisions of Section 80P(4). 3. Classification of the Assessee as a Co-operative Bank: The Tribunal examined whether the Assessee could be classified as a Co-operative Bank. The Assessing Officer argued that the Assessee acted like a Co-operative Bank by accepting deposits and providing loans to non-members and nominal members. However, the Tribunal referred to the decision in Jankalyan Nagri Sahakari Pat Sanshta Ltd., which clarified that a Co-operative Credit Society is distinct from a Co-operative Bank and thus eligible for deduction under Section 80P. The Tribunal also noted that the Assessee did not have a license from the RBI to operate as a bank, thus Section 80P(4) was not applicable. 4. Investment of Surplus Funds in Co-operative Banks and its Impact on Eligibility for Deduction under Section 80P: The Assessing Officer contended that the Assessee was not eligible for deduction under Section 80P(2)(d) because it invested surplus funds in Co-operative Banks instead of Co-operative Societies. The Tribunal, however, referred to the decision in Jankalyan Nagri Sahakari Pat Sanshta Ltd., which allowed such deductions. The Tribunal also considered the Hon'ble Bombay High Court’s judgment in Jalgaon District Central Cooperative Bank Ltd., which held that the definition of 'member' includes nominal, associate, and sympathizer members, thus supporting the Assessee's eligibility for deduction. Conclusion: The Tribunal concluded that the Assessee Co-operative Society is eligible for deduction under Section 80P of the Act. It held that the Assessee is not a Co-operative Bank and thus not subject to the restrictions of Section 80P(4). The Tribunal allowed the Assessee's appeal, granting the deduction of ?16,66,531/- under Section 80P. Order: The appeal of the Assessee was allowed, and the grounds raised by the Assessee were upheld. The Tribunal pronounced the order on the 23rd day of September, 2019.
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