2014 (2) TMI 676 - AT - Income Tax

Assessee eligible for deduction under section 80P(2)(a)(i) as credit co-operative society.

The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, affirming the CIT(A)'s decision to allow the deduction under section ... Nature of Assessee - Whether the assessee is a Co-operative Bank OR Primary Agricultural Credit Society – Deduction u/s 80P of the Act claimed – Held that:- Section 80P(4) has got its application only to cooperative banks - Section 80P(4) does not define the word 'Cooperative Society' - The existing sub section 80P(2)(a)(i) shall be applicable to cooperative society carrying on credit facility to its members – CIT(A) held that new sub-section(4) was brought into the statute for prohibiting deduction to Co-operative Banks only and not to Co-operative Credit Societies - The revenue could not point out any specific error in the order of the ld. CIT(A) - No material could be brought before us to show that the assessee was a Co-operative Bank within the meaning of sub-section(4) of section 80P and not a Co-operative Credit Society - No material was brought before us to show that the provision of accepting nominal members was not in accordance with the Cooperative Societies Act or Rules or the persons who were made nominal members were, in fact, not the members of the assessee-society – thus, there is no reason to interfere with the order of the CIT(A) – Decided against Revenue. Issues Involved:1. Whether the assessee is a 'Co-operative Bank' or a 'Primary Agricultural Credit Society'.2. Eligibility of the assessee for deduction under section 80P(2)(a)(i) of the Income Tax Act.3. Validity of the Assessing Officer's denial of deduction based on section 80P(4).Issue-wise Detailed Analysis:1. Whether the assessee is a 'Co-operative Bank' or a 'Primary Agricultural Credit Society':The primary issue in this appeal is the classification of the assessee as either a 'Co-operative Bank' or a 'Primary Agricultural Credit Society'. The Assessing Officer (AO) observed that the assessee's activities included banking business, trading in civil supply goods, and trading in fertilizers. The AO concluded that the assessee's main activity was banking, making it ineligible for deduction under section 80P(2)(a)(i) post the amendment effective from 1.4.2007. The AO argued that the society's activities were not intended for agricultural purposes, and mere naming as a 'Primary Agricultural Cooperative Society' was insufficient for claiming the deduction.2. Eligibility of the assessee for deduction under section 80P(2)(a)(i) of the Income Tax Act:The assessee contended that section 80P(4) does not deal with Primary Agricultural Credit Societies and defined 'Co-operative Bank' and 'Primary Agricultural Credit Society' under the Banking Regulation Act, 1949. The assessee argued that it did not fit the definition of a 'Co-operative Bank' as it was not a State Co-operative Bank, Central Co-operative Bank, or Primary Co-operative Bank. Additionally, the assessee's bye-laws did not permit admission of other co-operative societies as members, which was a requirement for being classified as a Co-operative Bank. The assessee maintained that it was entitled to the deduction under section 80P(2)(a)(i) as it did not engage in banking business as defined under the Banking Regulation Act.3. Validity of the Assessing Officer's denial of deduction based on section 80P(4):The CIT(A) allowed the assessee's claim for deduction, observing that section 80P(4) applies only to co-operative banks and not to credit co-operative societies. The CIT(A) referenced the Central Board of Direct Taxes clarification and the distinctions between co-operative banks and co-operative societies. The CIT(A) also cited the Bangalore Tribunal's decision in the case of ACIT vs M/s Bangalore Commercial Transport Credit Cooperative Society Ltd, which supported the assessee's position. The Tribunal upheld the CIT(A)'s order, noting that the Revenue could not provide evidence to classify the assessee as a Co-operative Bank under section 80P(4). The Tribunal found no reason to interfere with the CIT(A)'s decision, which was consistent with the Tribunal's earlier rulings.Conclusion:The Tribunal dismissed the Revenue's appeal and the assessee's cross objection, affirming the CIT(A)'s decision to allow the deduction under section 80P(2)(a)(i). The Tribunal concluded that the assessee was not a Co-operative Bank and was eligible for the deduction as a credit co-operative society. The order was pronounced on August 23, 2013, in Chennai.