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2020 (12) TMI 179 - AT - Income TaxDeduction u/s.80P(2)(a)(i) denied - assessee is engaged in the business of providing the credit facilities to its members. It accepts deposits from its members and provides credit facilities to its members - HELD THAT - From the definitions provided for the expression primary Co-operative bank and for the expression banking as per the Banking Regulation Act 1949, it could be safely concluded that unless the person collects deposits from the general public and provides credit facilities to the general public (both members and non-members), they cannot fall within the category of co-operative bank , primary co-operative bank or said to have engaged in the business of banking. In the instant case it is undisputed that assessee does not have any transaction with non-members of the credit society - assessee had collected deposits only from its members and had provided credit facilities to its members, in consonance with the powers provided in its bye laws. Hence, it could be safely concluded that the provisions of Section 80P(4) cannot be made applicable to the assessee society in the instant case. Hence, the assessee being a co-operative society would fall within the ambit of Section 80P(2)(a)(i) of the Act and hence, would be eligible for deduction thereon. Status of the assessee should be considered only as a co-operative credit society and not as a co-operative bank. Accordingly, the assessee is entitled for deduction u/s. 80P(2)(a)(i) of the Act for A.Y.2010-11 and we direct the ld. AO accordingly. Penalty u/s.271D - We find that assessee on realising its mistake had preferred an appeal before us against that order (though it is not aggrieved on the result of the order but aggrieved on the observations made thereon) for penalty u/s.271D of the Act for A.Y.2007-08, which is also listed alongwith these main appeals for other assessment years. It is trite law that no addition or denial of any deduction could be made by the revenue authorities merely based on admission of any person much less the authorised representative of the assessee without going into the actual charter documents i.e. in the instant case, objects of the society to ascertain and understand the status of the assessee. The objects of the society (bye laws of the assessee) which are enclosed in page 5 of the paper book filed before us categorically states that assessee society could transact only with its members. Hence, by no stretch of imagination, it could be considered as a co-operative bank. At the cost of repetition, a co-operative bank is one which transacts with general public which includes both members as well as non-members. In this regard, we would like to state that there is no estopel against the statute and therefore, it is open to the assessee to claim before the authorities that a particular item of income is not taxable despite having offered the same in its return of income or even having accepted the same as taxable before the authorities or even in the books of accounts - This appeal filed by the assessee against penalty u/s.271D of the Act for A.Y.2007-08 requires to be remanded back to the file of the ld. CIT(A) for denovo adjudication in accordance with law.
Issues Involved:
1. Entitlement of the assessee for deduction under Section 80P(2)(a)(i) of the Income Tax Act. 2. Classification of the assessee as a co-operative society or a co-operative bank. 3. Validity of the penalty imposed under Section 271D of the Income Tax Act due to cash deposits exceeding ?20,000. Detailed Analysis: Issue 1: Entitlement for Deduction under Section 80P(2)(a)(i) The primary issue was whether the assessee, engaged in providing credit facilities to its members, was entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act. The assessee claimed the deduction, arguing that it was a co-operative society providing credit facilities exclusively to its members and not to the general public. The Assessing Officer (AO) and Commissioner of Income Tax (Appeals) [CIT(A)] denied the deduction, classifying the assessee as a co-operative bank based on its activities and financial structure. The AO noted that the assessee's activities were akin to banking, and thus, Section 80P(4) disqualified it from claiming the deduction. The Tribunal found that the assessee was a co-operative credit society, not a co-operative bank, as it did not accept deposits from or lend to non-members. The Tribunal emphasized that the definition of a "co-operative bank" under the Banking Regulation Act, 1949, requires transactions with the general public, which the assessee did not engage in. Therefore, the Tribunal concluded that the assessee was eligible for the deduction under Section 80P(2)(a)(i). Issue 2: Classification as Co-operative Society or Co-operative Bank The AO and CIT(A) classified the assessee as a co-operative bank based on its financial activities and the statements made by the assessee's Chartered Accountant during penalty proceedings under Section 271D. The CIT(A) relied on the earlier acceptance of the assessee as a co-operative bank in penalty proceedings to deny the deduction under Section 80P(2)(a)(i). The Tribunal, however, held that the classification should be based on the assessee's charter documents and actual activities, not merely on admissions made during penalty proceedings. The Tribunal noted that the assessee's bye-laws restricted transactions to members only, which is not characteristic of a co-operative bank. The Tribunal also referenced legal precedents stating that admissions or misapprehensions by representatives do not determine tax liability or classification. Issue 3: Penalty under Section 271D The penalty under Section 271D was imposed for accepting cash deposits exceeding ?20,000, which violated Section 269SS. The assessee argued that as a co-operative bank, it was exempt from this provision. The CIT(A) had accepted this argument and deleted the penalty. The Tribunal noted that the assessee had misinterpreted its status during the penalty proceedings. The Tribunal remanded the issue back to the CIT(A) for a fresh adjudication, instructing the CIT(A) to consider the assessee's status based on its charter documents and actual activities, not on the earlier misinterpretation. Conclusion: The Tribunal concluded that the assessee was a co-operative credit society, not a co-operative bank, and was therefore entitled to the deduction under Section 80P(2)(a)(i). The Tribunal remanded the penalty issue back to the CIT(A) for reconsideration based on the correct classification of the assessee. Summary of Results: - ITA No.4211/Mum/2018 (A.Y.2007-08): Partly allowed for statistical purposes. - ITA No.4296/Mum/2016 (A.Y.2007-08): Partly allowed. - ITA No.4297/Mum/2016 (A.Y.2010-11): Partly allowed. - ITA No.403/Mum/2018 (A.Y.2014-15): Partly allowed. - ITA No.5983/Mum/2017 (A.Y.2013-14): Partly allowed. The order was pronounced on 03/12/2020 by proper mentioning on the notice board.
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