2014 (5) TMI 278 - AT - Income Tax

ITAT Upholds Deduction Under IT Act, Allows Cross-Objection

The ITAT dismissed the Revenue's appeal challenging the deduction under u/s.80P(2)(a)(i) of the IT Act for the Asst. Year 2009-10, upheld the CIT(A)'s ... Allowability of deduction 80P(2)(a)(i) of the Act – Held that:- Following CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] - the assessee was not allowed to do banking business as defined under Banking Regulation Act – it is not a co-operative bank and accordingly is not excluded from the benefit of deduction u/s.80P(2)(a)(i) of the Act - it does not fall under the exceptions as provided u/s 80P(4) of the Act - there being no mistake in the order of the CIT(A) – Decided against Revenue. Deduction u/s.80P(2)(a)(i) not allowed in respect of interest – Held that:- There is no finding on fact that whether the deposits were maintained by the assessee for liquidity of funds for the business purpose of the assessee and whether Jafari Momin Vikas Co-op. Credit Society Ltd. is applicable to the part of deduction u/s.80P(2)(a)(i) of the Act in respect of interest – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Issues:1. Deduction u/s.80P(2)(a)(i) of the IT Act for the Asst. Year 2009-10.2. Condonation of delay in filing cross-objection by the assessee.3. Allowance of deduction u/s.80P(2)(a)(i) in respect of interest amount.Issue 1: Deduction u/s.80P(2)(a)(i) of the IT Act for the Asst. Year 2009-10:The Revenue's appeal contested the allowance of deduction u/s.80P(2)(a)(i) of the IT Act amounting to Rs.24,07,397. The Revenue argued that the assessee-society did not qualify as an agricultural credit society based on their bye-laws. However, the assessee relied on a decision by the Hon'ble Gujarat High Court in a similar case, supporting their entitlement to the deduction. The ITAT, after reviewing all submissions and relevant orders, upheld the CIT(A)'s decision in favor of the assessee. The ITAT emphasized that since the assessee was not a co-operative bank and did not fall under the exceptions provided in the IT Act, they were eligible for the deduction u/s.80P(2)(a)(i). Consequently, the appeal by the Revenue was dismissed.Issue 2: Condonation of delay in filing cross-objection by the assessee:The cross-objection by the assessee was delayed by one year and ten months. The assessee cited a recent decision by the Hon'ble Jurisdictional High Court in support of their claim for deduction u/s.80P(2)(a)(i) of the IT Act. The ITAT, considering the recent court decision and the facts of the case, condoned the delay in filing the cross-objection by the assessee.Issue 3: Allowance of deduction u/s.80P(2)(a)(i) in respect of interest amount:The assessee's cross-objection contested the disallowance of deduction u/s.80P(2)(a)(i) for interest amounting to Rs.5,52,119. The assessee argued that the deposits were maintained for business purposes, requiring liquidity of funds. The ITAT noted the lack of findings on whether the deposits were for business purposes and directed the issue to be reconsidered by the AO in accordance with the law, providing a reasonable opportunity for the assessee to present their case. As a result, the cross-objection by the assessee was allowed for statistical purposes.In conclusion, the ITAT dismissed the Revenue's appeal regarding the deduction under u/s.80P(2)(a)(i) of the IT Act for the Asst. Year 2009-10, condoned the delay in filing the cross-objection by the assessee, and directed a reevaluation of the deduction for interest amount in the cross-objection.