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2022 (6) TMI 1009 - AT - Income TaxDenial of claim of deduction u/s.80P(2)(a)(i) - assessee is a primary agricultural credit co-operative society - HELD THAT - Chennai Bench of ITAT in the case of TN Co-operative State Agricultural Rural Development 2022 (6) TMI 770 - ITAT CHENNAI and this issue has been dealt with after considering the recent decision of Hon ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd 2021 (1) TMI 488 - SUPREME COURT Admittedly, the assessee is a primary agricultural credit co-operative society and is governed by Tamil Nadu Co-operative Societies Act and it is carrying out its co-operative business with its members, the claim of deduction u/s.80P(2)(a)(i) of the Act cannot be denied. Hence, we reverse the orders of lower authorities and allow this issue of all five appeals of assessee. TDS u/s 194A - Addition invoking the provisions of section 40(a)(ia) - HELD THAT - As the issue is covered by the decision of Hon ble Madras High Court in the case of Coimbatore District Central Co-operative Bank Ltd. 2016 (1) TMI 370 - MADRAS HIGH COURT , the amended provision of section 194A w.e.f. 01.06.2015, which is held as prospective, will not apply to the present case because before us the assessment year is 2009-10. Hence, this issue of assessee s appeal is allowed.
Issues Involved:
1. Condonation of delay in filing appeals. 2. Denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act. 3. Disallowance of interest paid to members without deduction of TDS under Section 194A. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing Appeals: The appeals filed by the assessee in ITA Nos. 627 to 630/CHNY/2020 were time-barred by 42 days. The delay was attributed to the COVID-19 lockdown period. The Hon'ble Supreme Court, in Miscellaneous Application No. 665 of 2021, directed that delays during the period from 15.03.2020 to 14.03.2021 should be condoned. Following these directions, the delay was condoned, and the appeals were admitted. 2. Denial of Deduction under Section 80P(2)(a)(i): The main issue in these appeals was the denial of the claim of deduction under Section 80P(2)(a)(i) of the Income Tax Act. The assessee, a Primary Agricultural Cooperative Credit Society registered under the Pondicherry Cooperative Societies Act, 1972, claimed the deduction on the grounds that it provided credit facilities to its members. The AO denied the deduction, classifying the assessee as a Primary Cooperative Bank under Section 56(ccv) of the Banking Regulation Act, which accepts deposits from the public, including non-members (Class 'C' members). The CIT(A) upheld the AO's decision, relying on the Supreme Court's decision in Citizen Co-operative Bank Ltd. vs. ACIT. However, the assessee argued that the Supreme Court's decision in The Mavilayi Service Co-operative Bank Ltd. vs. CIT clarified that Section 80P should be read liberally in favor of the assessee, and the deduction should be allowed if the cooperative society transacts business with its members. The Tribunal noted that the assessee transacted business with its members, including 'A', 'B', and 'C' class members, and the Pondicherry Cooperative Societies Act was similar to the Tamil Nadu and Andhra Pradesh Acts. The Tribunal referred to the Madras High Court's decision in S 1911 AN Udhur PACCS vs. PCIT, which held that all members, including associate members, should be considered for the purpose of Section 80P deduction. The Tribunal concluded that the assessee, being a primary agricultural credit cooperative society, was entitled to the deduction under Section 80P(2)(a)(i). Therefore, the orders of the lower authorities were reversed, and the deduction was allowed. 3. Disallowance of Interest Paid to Members without Deduction of TDS under Section 194A: The CIT(A) confirmed the AO's disallowance of interest paid to members without TDS deduction under Section 194A, invoking Section 40(a)(ia). The assessee argued that this issue was covered by the Madras High Court's decision in Coimbatore District Central Co-operative Bank Ltd. vs. ITO, which held that the amended provision of Section 194A was prospective and did not apply to cooperative societies carrying on banking business. Since the assessment year in question was 2009-10, the Tribunal applied the High Court's decision and allowed the assessee's appeal on this issue. Conclusion: All the appeals filed by the assessee were allowed, with the Tribunal condoning the delay, allowing the deduction under Section 80P(2)(a)(i), and reversing the disallowance of interest paid to members without TDS deduction. The order was pronounced on 8th June 2022 at Chennai.
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