2015 (4) TMI 1055 - AT - Income Tax

Appellate tribunal affirms tax treatment for credit co-op societies under Income Tax Act

The appellate tribunal affirmed the Commissioner's decision, dismissing the Revenue's appeal. The judgment clarified that Section 80P(4) of the Income Tax ... Relief u/s 80P - assessee is a credit co-operative Society - CIT(A) allowed the assessee's appealallowing relief u/s 8OP - Held that:- The conclusion drawn by the ld. CIT(A) is in accordance with judgment of Hon’ble Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co. Op. Credit Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] as per CBDT Circular No. 133 of 2007 dated 9.5.2007 - Sub-section(4) of section 80P will not apply to an assessee which is not a co-operative bank - The respondent assessee is not a credit co-operative bank but a credit co-operative society - Exclusion clause of sub-section(4) of section 80P, would not apply to it. Also see CIT vs. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha [2015 (1) TMI 821 - KARNATAKA HIGH COURT] - Decided against Revenue. Issues:1. Interpretation of Section 80P of the Income Tax Act, 1961 regarding exemption for Co-Operative Societies.2. Determination of applicability of Section 80P(4) of the Act to a credit co-operative society.3. Analysis of relevant case laws and judicial interpretations in deciding the eligibility of a co-operative society for deduction under Section 80P.Issue 1: Interpretation of Section 80P of the Income Tax ActThe case involved a Co-Operative Society registered under the Maharashtra Co-Operative Societies Act, 1960, providing credit facilities to its members. The Assessing Officer (A.O.) denied the society's claim for exemption under Section 80P(2)(a)(i) of the Act based on the insertion of Section 80P(4) by the Finance Act 2006. The A.O. concluded that even a co-operative society providing credit facilities would be denied exemption under Section 80P. The dispute centered on whether the society qualified for the exemption under Section 80P.Issue 2: Applicability of Section 80P(4) to a credit co-operative societyThe A.O. assessed the society's total income and rejected its claim for deduction under Section 80P. However, the Commissioner of Income Tax (Appeals) disagreed with the A.O., stating that the society's activities did not constitute banking facilities as defined in the Banking Regulation Act, 1949. The Commissioner relied on various tribunal decisions to support the argument that the society's activities did not fall under the purview of banking activities, thus making it eligible for the deduction under Section 80P.Issue 3: Analysis of Case Laws and Judicial InterpretationsThe Commissioner's decision was supported by references to judicial precedents. The judgment highlighted the interpretation of Section 80P(4) and the exclusion of benefits for co-operative banks, emphasizing that the legislative intent was not to exclude co-operative societies providing credit facilities to members. The judgments of the Gujarat High Court and Karnataka High Court clarified that the exclusion under Section 80P(4) applied to co-operative banks exclusively engaged in banking business, not to credit co-operative societies. The courts emphasized that the legislative intent was to differentiate between co-operative banks and societies engaging in credit activities, thereby affirming the Commissioner's decision to allow the deduction under Section 80P for the society in question.In conclusion, the appellate tribunal affirmed the Commissioner's decision, dismissing the Revenue's appeal. The judgment underscored the distinction between co-operative banks and credit co-operative societies in interpreting the eligibility for deduction under Section 80P of the Income Tax Act, 1961. The case provided clarity on the legislative intent behind Section 80P(4) and its application to different types of co-operative entities, ensuring that societies providing credit facilities to members were not excluded from the deduction benefits.