2022 (8) TMI 800 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - whether assessee qualifies for deduction being a registered co-operative society vis- -vis in providing credit facilities to its members? - HELD THAT - We hold that the CIT(A) was not justified in confirming the addition made by the Assessing Officer by way of adjustment u/s 143(1)(a) denying deduction u/s 80P(2)(a)(i) of the Act when the assessee qualifies for the deduction being a registered co-operative society engaged in providing credit facilities to its members. Appeal of assessee allowed.

Summary

Issues Involved:
1. Denial of deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961 to a registered co-operative society providing credit facilities to its members.

Analysis:
The judgment deals with the denial of deduction u/s 80P(2)(a)(i) of the Income-tax Act, 1961 to a registered co-operative society providing credit facilities to its members. The assessee contended that it was eligible for deduction under this section as it was engaged in providing credit facilities to its members. The Tribunal analyzed the relevant provisions of the Act and previous decisions to determine the eligibility of the assessee for the deduction. It was established that the term "profits and gains of business attributable to" providing credit facilities has a broad interpretation, encompassing income derived from providing credit facilities as well as other related income. The Tribunal emphasized that as long as there is a link between the income and the business of providing credit facilities, the income qualifies for deduction. The Tribunal also highlighted that the exercise of revisional power under section 263 is not applicable to debatable issues and that if two views are possible, the case falls outside the revisional power.

Moreover, the Tribunal referenced previous cases and the decisions of different High Courts to support its conclusion. It noted that the Pune Benches of the Tribunal had allowed similar deductions in earlier cases, and the Tribunal favored the view that supported the assessee's claim for deduction. The judgment also addressed a second issue regarding interest income received on refunds u/s 244A of the Act. The Tribunal relied on a Special Bench order to conclude that such interest is eligible for deduction under section 80P(2)(a)(i) of the Act. Ultimately, the Tribunal held that the denial of deduction to the assessee was unjustified, as the assessee qualified for the deduction as a registered co-operative society providing credit facilities to its members.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the denial of deduction u/s 80P(2)(a)(i) was unwarranted given the nature of the assessee's activities as a registered co-operative society providing credit facilities to its members.