2016 (5) TMI 1445 - AT - Income Tax

Tribunal upholds deduction under section 80P(2)(a)(i)

The Tribunal dismissed the Revenue's appeals and affirmed the Commissioner of Income Tax (Appeals)'s decision to allow the deduction under section ... Allowing deduction to the assessee u/s 80P(2)(a)(i) - Held that:- The appellant's case is not covered by section 80P(4) as it is not a 'co-operative bank' and therefore, it is entitled to the exemption u/s 80P(2)(a)(i) of the IT. Act. Commissioner of Income Tax (Appeals) has allowed the claim of deduction under sec. 80P(2)(a)(i) of the Act after following the decision 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 orders of the Commissioner of Income Tax (Appeals), which are hereby confirmed and this ground of appeal of the Revenue is dismissed. Issues Involved:1. Whether the Commissioner of Income Tax (Appeals) erred in allowing deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961.2. Whether the assessee qualifies as a cooperative bank under section 80P(4) and is thus ineligible for the deduction.Issue-wise Detailed Analysis:1. Allowance of Deduction under Section 80P(2)(a)(i):The primary issue in these appeals is whether the Commissioner of Income Tax (Appeals) correctly allowed the deduction to the assessee under section 80P(2)(a)(i) of the Income Tax Act, 1961. The assessee, a cooperative society registered under the Karnataka Cooperative Societies Act, 1959, claimed deductions for the Assessment Years 2009-10 and 2010-11. The Assessing Officer had rejected these claims, stating that the assessee functioned as a cooperative bank and was thus ineligible for the deduction by virtue of section 80P(4). However, the Commissioner of Income Tax (Appeals) allowed the deduction, referencing consistent rulings by the Jurisdictional ITAT and the Hon’ble Jurisdictional High Court of Karnataka that cooperative societies providing credit facilities to their members and not registered with the RBI as banks are entitled to deductions under section 80P(2)(a)(i).2. Qualification as a Cooperative Bank under Section 80P(4):The Assessing Officer contended that the assessee was a cooperative bank, thus falling under the exclusion provided by section 80P(4). This section states that deductions under section 80P do not apply to cooperative banks other than primary agricultural credit societies or primary cooperative agricultural and rural development banks. The Assessing Officer's conclusion was based on the definition of a 'primary cooperative bank' under the Banking Regulation Act, 1949, which includes entities whose primary business is banking, have a paid-up share capital and reserves of not less than one lakh rupees, and whose bye-laws do not permit admission of any other cooperative society as a member.The Commissioner of Income Tax (Appeals), however, found that the assessee did not meet these criteria. The assessee was not registered with the RBI as a bank and was engaged solely in providing credit facilities to its members, thus qualifying for the deduction under section 80P(2)(a)(i). This view was supported by multiple judicial precedents, including decisions by the Karnataka High Court and the Gujarat High Court, which held that cooperative societies not registered as banks with the RBI are eligible for deductions under section 80P(2)(a)(i).Judicial Precedents and Tribunal's Decision:The Tribunal noted that the issue had been previously adjudicated in favor of the assessee in ITA No. 315/PNJ/2015 for the Assessment Year 2011-12. The Tribunal reiterated that cooperative societies providing credit facilities to members and not registered as banks with the RBI are entitled to deductions under section 80P(2)(a)(i). The Tribunal also referenced decisions from the Karnataka High Court and other judicial forums that supported this interpretation.Conclusion:The Tribunal dismissed the Revenue's appeals, affirming the Commissioner of Income Tax (Appeals)'s decision to allow the deduction under section 80P(2)(a)(i). The Tribunal found no merit in the Revenue's arguments and upheld the view that the assessee, not being a cooperative bank, was eligible for the deduction. The assessee's cross-objections were dismissed as not pressed.Final Order:The appeals of the Revenue and the cross-objections of the assessee were dismissed, with the Tribunal confirming the orders of the Commissioner of Income Tax (Appeals). The judgment was pronounced on May 11, 2016, in Goa.