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2020 (3) TMI 46 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee is a Co-operative Society registered under the Karnataka Souharda Sahakari Act, 1997 - HELD THAT - As decided in the case of M/s.Sindhu Credit Souharda Sahakari Niyamita v. ITO 2019 (12) TMI 1277 - ITAT BANGALORE Assessee s claim regarding deduction u/s. 80P(2)(a)(i) cannot be rejected on this basis that assessee is a Souharda Sahakari and therefore, cannot be regarded as a co-operative society. But after holding so, set aside the order of CIT(A) and restore the matter back to the AO for fresh decision regarding allowability of deduction u/s. 80P(2)(a)(i) after examining other conditions for allowing such deduction because those conditions are not examined by the AO till now. - Appeal filed by the assessee is allowed for statistical purposes.
Issues Involved:
1. Eligibility for Deduction under Section 80P of the Income Tax Act. 2. Classification of the Assessee as a Co-operative Society or a Co-operative Bank. 3. Applicability of judgments and precedents to the Assessee's case. Issue-wise Detailed Analysis: 1. Eligibility for Deduction under Section 80P of the Income Tax Act: The primary issue was whether the Assessee, a Souharda Credit Co-Operative Limited, was eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Assessee claimed a deduction amounting to ?19,15,582, which was disallowed by the Assessing Officer (AO) on the grounds that the Assessee was engaged in the business of banking and therefore not eligible for the deduction. The AO's decision was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal, however, found that the issue required further examination and remitted the matter back to the AO for fresh adjudication, specifically to examine other conditions for allowing such deduction. 2. Classification of the Assessee as a Co-operative Society or a Co-operative Bank: The Assessee argued that it was a Co-operative Society registered under the Karnataka Souharda Sahakari Act, 1997, and not regulated by the Reserve Bank of India (RBI) or subject to Part V of the Banking Regulation Act. The AO and CIT(A) treated the Assessee as a co-operative bank, thereby disallowing the deduction under Section 80P. The Tribunal referred to previous judgments, including those from the Income Tax Appellate Tribunal (ITAT) and High Courts, which clarified that Souharda Co-operatives registered under the Karnataka Souharda Sahakari Act, 1997, are indeed considered co-operative societies. This classification is crucial as it determines the eligibility for deductions under Section 80P. 3. Applicability of Judgments and Precedents: The Assessee relied on several judgments to support its claim for deduction under Section 80P: - Siddartha Pattina Souharda Sahakari Niyamitha Vs. ITO: The Tribunal held that Souharda Co-operatives are co-operative societies and eligible for deductions under Section 80P. - Udaya Souharda Credit Co-Operative Society Ltd Vs. ITO: The Tribunal remanded the matter to the AO to ascertain the impact of registration under the Souharda Act. - NLC Employees Co-Operative Society Vs. Commissioner of Income Tax Officer: The Madras High Court held that a Co-operative Credit Society providing financial assistance to its members is eligible for deduction under Section 80P. - THE COMMISSIONER OF INCOME TAX, BELGAUM Vs SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMIT: The Karnataka High Court confirmed that Co-operative Credit Societies are eligible for deduction under Section 80P. - TUMKUR MERCHANTS SOUHARDA CREDIT CO-OPERATIVE LTD Vs THE INCOME TAX OFFICER: The Karnataka High Court held that interest income from bank deposits received by the society is eligible for deduction under Section 80P. Conclusion: The Tribunal concluded that the Assessee's claim for deduction under Section 80P(2)(a)(i) could not be rejected merely because it was a Souharda Sahakari. The Tribunal set aside the order of the CIT(A) and remitted the matter back to the AO for fresh adjudication, directing the AO to examine other conditions for allowing the deduction. The appeal filed by the Assessee was allowed for statistical purposes, and the Tribunal's decision was pronounced on February 27, 2020.
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