2019 (7) TMI 1582 - AT - Income Tax

Tribunal grants deductions to Credit Society under Section 80P of Income Tax Act

The Tribunal allowed the appeals, holding that the assessee is eligible for the deductions claimed under Section 80P of the Income Tax Act, 1961. The ... Deduction u/s 80P denied - Assessee was acted like a regular Bank by accepting deposits from any person and also giving loans and therefore the main motto of the assessee is to earn more profits - HELD THAT:- Hon’ble Bombay High Court in the case of Jalgaon District Co-operative Central Cooperative Bank Ltd. [2003 (9) TMI 56 - BOMBAY HIGH COURT] has held that the definition of ‘member’ given in section 2(19) of the Maharashtra Co-operative Societies Act takes within its sweep even a nominal member, associate member and sympathizer member and there is no distinction made between duly registered member and nominal, associate and sympathizer member. I therefore, following the decision of Co-ordinate Bench of the Tribunal in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., [2012 (9) TMI 288 - ITAT, PUNE] and following the same hold that the assessee is eligible for deduction of ₹ 18,38,878/- u/s 80P(2)(d) of the Act in respect of the amount invested in PDCC i.e., Co-operative Banks and other Banks. I am further of the view that in the present case, the ratio of decision of the High Court in the case of M/s. S-1308 Ammapet Primary Agricultural Co-operative Bank Ltd. [2019 (1) TMI 116 - MADRAS HIGH COURT] would be applicable. I therefore following the ratio of the decisions cited herein above and the decision of Hon’ble Bombay High Court hold that assessee is eligible for deduction u/s 80P of the Act. Thus, the grounds of the assessee are allowed. Issues Involved:1. Denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.2. Treatment of the appellant as a 'Business Financer' instead of a Credit Co-operative Society.3. Denial of deduction under Section 80P(2)(d) for interest received from Pune District Central Co-operative Bank.4. Alternative claim for proportionate deduction under Section 80P.Detailed Analysis:1. Denial of Deduction under Section 80P(2)(a)(i):The primary issue was whether the assessee, a co-operative society engaged in providing credit facilities to its members, was eligible for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The AO denied the deduction, treating the assessee as a Co-operative Bank, which is not eligible for such deduction under Section 80P(4). The AO's view was based on the assessee's activities, which included providing credit facilities to non-members and nominal members, and investing surplus funds in Co-operative Banks and other banks.2. Treatment as 'Business Financer':The AO concluded that the assessee acted like a regular bank by accepting deposits from any person and giving loans, thus aiming to earn more profits. This led to the treatment of the assessee as a 'Business Financer' rather than a mere Credit Co-operative Society.3. Denial of Deduction under Section 80P(2)(d):The AO also denied the deduction under Section 80P(2)(d) for the interest received from investments in Co-operative Banks, arguing that the assessee should invest surplus funds with Co-operative Societies, not Co-operative Banks.4. Alternative Claim for Proportionate Deduction:The assessee alternatively claimed a proportionate deduction under Section 80P to the extent of eligible income earned. This was also denied by the AO.Tribunal's Findings:On Deduction under Section 80P(2)(a)(i):The Tribunal found that the assessee, being a Co-operative Credit Society, is distinct from a Co-operative Bank and thus eligible for deduction under Section 80P(2)(a)(i). The Tribunal relied on the decision in the case of Jankalyan Nagri Sahakari Pat Sanshta Ltd., which held that a Co-operative Credit Society is not a Co-operative Bank and thus eligible for the deduction.On Treatment as 'Business Financer':The Tribunal did not uphold the AO's treatment of the assessee as a 'Business Financer.' It noted that the assessee's activities were within the scope of a Co-operative Credit Society as defined under the Maharashtra Co-operative Societies Act, 1960.On Deduction under Section 80P(2)(d):The Tribunal held that the assessee is eligible for deduction under Section 80P(2)(d) for interest received from investments in Co-operative Banks. The Tribunal noted that the definition of 'member' under the Maharashtra Co-operative Societies Act includes nominal, associate, and sympathizer members, which supports the assessee's claim.On Alternative Claim for Proportionate Deduction:Given that the Tribunal allowed the primary claim for deduction under Section 80P(2)(a)(i) and (2)(d), the alternative claim for proportionate deduction became redundant.Conclusion:The Tribunal allowed the appeals, holding that the assessee is eligible for the deductions claimed under Section 80P of the Income Tax Act, 1961. The grounds of the assessees were allowed, and the appeals were decided in their favor, following precedents and interpretations of relevant legal provisions.