2016 (3) TMI 1278 - AT - Income Tax

Cooperative bank entitled to tax deduction under sec. 80P(2)(a)(i)

The Revenue's appeal was dismissed as the assessee, not meeting the criteria of a primary cooperative bank, was entitled to the deduction under sec. ... Allowing deduction u/s 80P(2)(a)(i) and 80P(2)(c)(ii) - Held that:- Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2) after following the decision of the Hon’ble Bombay High Court at Panaji in the case of M/s. The Quepem Urban Cooperative Credit Society Ltd. Vs. ACIT [2015 (6) TMI 573 - BOMBAY HIGH COURT]. No contrary decision could be cited by the Departmental Representative. We, therefore, do not find any good and justifiable reason to interfere with the order of the Commissioner of Income Tax (Appeals) - Decided against revenue. Addition made under sec. 40(a)(ia) - Held that:- Commissioner of Income Tax (Appeals) correctly deleted the disallowance made under sec. 40(a)(ia) of the Act by observing that the assessee-society is not held to be a bank, therefore, TDS provisions are not applicable to the assessee-society. Hence, he deleted the addition made under sec. 40(a)(ia) of the Act.- Decided against revenue Issues Involved:1. Deduction under secs. 80P(2)(a)(i) and 80P(2)(c)(ii) of the Income Tax Act, 1961.2. Addition made under sec. 40(a)(ia) of the Act.Analysis:Issue 1: Deduction under secs. 80P(2)(a)(i) and 80P(2)(c)(ii) of the Income Tax Act, 1961:The main issue in this appeal was whether the assessee was entitled to deduction under secs. 80P(2)(a)(i) and 80P(2)(c)(ii) of the Income Tax Act. The Assessing Officer had rejected the claim of deduction under sec. 80P(2) on the grounds that the assessee was a cooperative bank and not entitled to claim deduction under sec. 80P(4). However, the Commissioner of Income Tax (Appeals) allowed the claim of the assessee after analyzing the definition of a cooperative bank under the Banking Regulation Act, 1949. The Commissioner held that the appellant did not meet the criteria to be considered a primary cooperative bank as defined in the Act, and thus, was entitled to the deduction under sec. 80P(2)(a)(i) of the Act. The High Court's decision was relied upon to support this conclusion. The Revenue's appeal was dismissed as no error was found in the Commissioner's order.Issue 2: Addition made under sec. 40(a)(ia) of the Act:The second issue involved the addition made under sec. 40(a)(ia) of the Act concerning disallowance of interest payments without TDS. The Assessing Officer disallowed a certain amount under this provision, but the Commissioner of Income Tax (Appeals) deleted the disallowance. The basis for deletion was that since the assessee-society was not considered a bank, TDS provisions were not applicable. The Departmental Representative did not provide any submissions on this ground during the hearing, leading to the dismissal of the Revenue's appeal.In conclusion, the appeal filed by the Revenue was dismissed, confirming the orders of the Commissioner of Income Tax (Appeals) regarding both the deduction under secs. 80P(2)(a)(i) and 80P(2)(c)(ii) and the addition made under sec. 40(a)(ia) of the Income Tax Act, 1961.