2014 (2) TMI 1412 - AT - Income Tax

Cooperative society qualifies for tax deduction under section 80P(2)(a)(i)

The Asstt. Commissioner of Income-tax Business Circle VII Chennai Versus M/s Tamilnadu Cooperative Housing Federation Ltd

The Tribunal upheld the decision of the CIT(A) that the assessee, a cooperative society, was eligible for a deduction under section 80P(2)(a)(i) of the ... Deduction u/s 80P - assessee states itself to be a cooperative society engaged in the business of providing credit facilities to its members and hence falls within the definition of a cooperative bank - Scope of amendment to sec 80P(4) - whether the assessee, a cooperative society providing credit facility to its members is a cooperative bank or not so as to be covered by section 80P(4) of the Act denying deduction aforesaid? - HELD THAT:- We make it clear that the Revenue has failed to file any paper book or evidence so as to prove that the assessee/co-operative society is a co-operative bank whose claim for deduction u/s 80P is hit by sub-section(4). In these circumstances, we uphold the CIT(A)’s order granting deduction to the assessee u/s 80P of the Act and reject contentions of the Revenue. Issues Involved:1. Disallowance of deduction claimed under section 80P of the Income-tax Act, 1961.2. Interpretation of section 80P(4) concerning cooperative societies and cooperative banks.3. Eligibility of the assessee for deduction under section 80P(2)(a)(i).Detailed Analysis:1. Disallowance of Deduction Claimed Under Section 80P:The Revenue appealed against the deletion of the disallowance made by the Assessing Officer (AO) of the deduction claimed by the assessee under section 80P, amounting to Rs. 46.72 crores. The AO had disallowed this deduction on the grounds that the assessee, a cooperative society, was engaged in activities akin to banking and thus fell within the ambit of section 80P(4), which excludes cooperative banks from availing the deduction.2. Interpretation of Section 80P(4):The Revenue argued that, as per section 80P(4) introduced by the Finance Act 2006, cooperative banks are not eligible for deduction under section 80P from the assessment year 2007-08 onwards. They contended that the assessee, being a cooperative society providing credit facilities, should be construed as a cooperative bank and thus ineligible for the deduction.The CIT(A) examined the statutory provisions and concluded that the assessee was not a cooperative bank but a cooperative society. The CIT(A) distinguished between cooperative societies and cooperative banks, noting that the former has a broader connotation. The CIT(A) emphasized that the assessee did not meet the criteria of a cooperative bank as defined under the Banking Regulation Act, 1949, since it did not accept deposits from the public, was not regulated by the RBI, and did not have 'bank,' 'banker,' or 'banking' in its name.3. Eligibility for Deduction Under Section 80P(2)(a)(i):The CIT(A) held that the assessee was a cooperative society providing credit facilities to its members and not a cooperative bank. Therefore, it was eligible for the deduction under section 80P(2)(a)(i). The CIT(A) supported this conclusion by referencing judicial precedents that distinguished cooperative credit societies from cooperative banks, asserting that the former are entitled to deductions under section 80P.Judgment:The Tribunal upheld the CIT(A)'s decision, affirming that the assessee was not a cooperative bank but a cooperative society engaged in providing credit facilities to its members. It noted that the Revenue failed to provide evidence to classify the assessee as a cooperative bank. Consequently, the assessee was entitled to the deduction under section 80P(2)(a)(i). The Tribunal dismissed the Revenue's appeal and deemed the assessee's cross objections as infructuous.Conclusion:The Tribunal concluded that the assessee, being a cooperative society and not a cooperative bank, was eligible for the deduction under section 80P(2)(a)(i). The Revenue's appeal was dismissed, and the assessee's cross objections were rendered infructuous. The order was pronounced on February 20, 2014, in Chennai.