2015 (11) TMI 796 - AT - Income Tax

Co-op Society Eligible for Tax Deduction, Appeal Dismissed

INCOME-TAX OFFICER Versus JAMKHANDI TALUKA SCHOOL TEACHERS CO-OPERATIVE CREDIT SOCIETY LTD.

The Tribunal upheld the Commissioner of Income-tax (Appeals)' decision, ruling that the co-operative society was entitled to the deduction under section ... Denial of deduction under section 80P(2)(a)(i) - Held that:- The issue raised by the assessee in these appeals has already been considered and decided by this Tribunal in the case of Asst. CIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd. [2011 (4) TMI 1222 - ITAT BANGALORE ] wherein this Tribunal held that section 80P(4) is applicable only to co-operative banks and not to credit co-operative societies. The intention of the Legislature of bringing in co-operative banks into the taxation structure was mainly to bring in par with the commercial banks. Since the assessee is a co-operative society and not a co-operative bank, the provisions of section 80P(4) will not have application in the assessee's case and therefore, it is entitled to deduction under section 80P(2)(a)(i) of the Act We find that in the assessee's own case for the assessment year 2010-11 on identical facts, the issue was decided in favour of the assessee - Decided in favour of assessee. Issues Involved:Denial of deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Background and Appeal:The Revenue appealed against the order dated September 12, 2014, by the Commissioner of Income-tax (Appeals), Belgaum, concerning the assessment year 2011-12. The primary issue was the denial of deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, claimed by the assessee, a co-operative society registered under the Karnataka State Co-operative Societies Act, 1959, engaged in providing credit facilities to its members.2. Assessing Officer's View:During the scrutiny assessment proceedings under section 143(3), the Assessing Officer concluded that the assessee, being a co-operative society carrying on banking business, was not entitled to deduction under section 80P(2)(a)(i) due to the amendment by the Finance Act, 2006, which inserted sub-section (4) to section 80P. The Assessing Officer classified the assessee as a co-operative bank and noted that the activities of the assessee fell within the Banking Regulations Act, thus disqualifying it from the deduction.3. Commissioner of Income-tax (Appeals) Decision:The Commissioner of Income-tax (Appeals) allowed the assessee's claim for deduction under section 80P(2)(a)(i), referencing the judgment of the Karnataka High Court in CIT v. Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot, which held that a co-operative society, not being a co-operative bank, was entitled to the deduction.4. Tribunal's Analysis and Decision:The Tribunal reviewed the material on record and previous decisions, particularly the case of Asst. CIT v. Bangalore Commercial Transport Credit Co-operative Society Ltd., where it was held that section 80P(4) applies only to co-operative banks and not to credit co-operative societies. The Tribunal emphasized that the intention of the Legislature was to bring co-operative banks on par with commercial banks, and since the assessee was a co-operative society and not a co-operative bank, section 80P(4) did not apply. Thus, the assessee was entitled to the deduction under section 80P(2)(a)(i).5. Supporting Judgments:The Tribunal also referenced the Gujarat High Court's judgment in CIT v. Jafari Momin Vikas Co-op. Credit Society Ltd., which clarified that section 80P(4) does not apply to entities that are not co-operative banks. The Central Board of Direct Taxes (CBDT) Circular No. 133 of 2007 further supported this interpretation, stating that sub-section (4) of section 80P would not apply to entities that do not fall within the definition of a co-operative bank as per the Banking Regulation Act, 1949.6. Conclusion:The Tribunal upheld the order of the Commissioner of Income-tax (Appeals), affirming that the assessee, being a co-operative society and not a co-operative bank, was entitled to the deduction under section 80P(2)(a)(i) of the Act. Consequently, the appeal by the Revenue was dismissed.7. Pronouncement:The judgment was pronounced in the open court on May 8, 2015.