2014 (10) TMI 1063 - AT - Income Tax

Tribunal upholds deduction for credit co-op society, distinguishing from co-op banks

The ITO-15 (1) (4), Matru Mandir, Mumbai Versus The Maharashtra Mantraliya Va Sanlagana Shaskiya Karamchari Coop. Credit Society Ltd.

The Tribunal dismissed the Revenue's appeal, upholding the allowance of deduction u/s.80P to the assessee, a credit co-operative society. The decision was ... Deduction u/s.80P(2)(a)(i) - assessee is a co-operative credit society registered under Co-operative Societies Act engaged in the business of accepting deposits from members and lending to members of the co-operative credit society only on the basis of self help and mutuality - AO was of the firm belief that the assessee fulfils the condition laid down u/s.56(c)(ccv) of part V of the Banking Regulation Act, 1949 for being a co-operative bank and proceeded by denying the claim of deduction - HELD THAT:- The Hon’ble Gujarat High Court in the case of CIT vs. Jafari Momin Vikas Co-op. Credit Society Ltd. [2014 (2) TMI 28 - GUJARAT HIGH COURT] as held we cannot entertain the Revenue’s contention that section 80P(4) would exclude not only the co-operative banks other than those fulfilling the description contained therein but also credit societies, which are not co-operative banks. In the present case, respondent assessee is admittedly not a credit co-operative bank but a credit co-operative society. Exclusion clause of sub-section (4) of section 80P, therefore, would not apply. In the result, Tax Appeals are dismissed.’ Similar view is taken by the Tribunal’s Mumbai Bench in the case of M/s. Mumbai Teleworkers Co-op. Credit Society Ltd. [2014 (7) TMI 1057 - ITAT MUMBAI] and in the case of M/s. Kulswami Co-op. Credit Society Ltd. [2014 (4) TMI 355 - ITAT MUMBAI] - Decided against revenue. Issues:1. Allowance of deduction u/s.80P to the assessee despite operating as a credit co-operative society.2. Consideration of insertion of Sec.80P(4) and sub clause (viia) to Sec.2(24) of the Finance Act, 2006.3. Comparison of the assessee's case with relevant case laws.4. Failure to appreciate the previous order of the ld. CIT(A) in a similar case for A.Y. 2008-09.Analysis:Issue 1:The appeal by the Revenue challenges the allowance of deduction u/s.80P to the assessee, a co-operative credit society. The assessee justified its claim by emphasizing its operations limited to members only, not offering banking facilities to the general public. The Assessing Officer denied the deduction, citing conditions under the Banking Regulation Act, 1949. However, the ld. CIT(A) acknowledged the limited scope of the assessee's activities and allowed the deduction u/s.80P(2)(a)(i) based on judicial decisions supporting such claims.Issue 2:The Revenue raised concerns regarding the applicability of Sec.80P(4) and sub clause (viia) to Sec.2(24) of the Finance Act, 2006. The Hon'ble Gujarat High Court clarified that Sec.80P(4) does not apply to entities not classified as co-operative banks. This clarification was supported by the Tribunal's Mumbai Bench decisions, aligning with the facts and issues in the present case. As the assessee was a credit co-operative society, not a bank, the exclusion clause of Sec.80P(4) did not apply, leading to the dismissal of the Revenue's appeal.Issue 3:The ld. CIT(A) compared the facts of the assessee's case with relevant judicial decisions, emphasizing the distinction between credit co-operative societies and co-operative banks. The decisions cited by the assessee's counsel from the Hon'ble Gujarat High Court and the Tribunal Mumbai Benches supported the assessee's position, leading to the rejection of the Revenue's contentions.Issue 4:The Revenue contended that the ld. CIT(A) failed to appreciate its own previous order in a similar case for A.Y. 2008-09. However, the Tribunal found no reason to interfere with the ld. CIT(A)'s findings, citing consistency with the judicial decisions and the specific nature of the assessee's operations as a credit co-operative society.In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the allowance of deduction u/s.80P to the assessee, a credit co-operative society, based on the limited scope of its activities and the non-applicability of Sec.80P(4) to such entities. The decision was supported by relevant judicial precedents and consistent with the distinction between co-operative banks and credit co-operative societies.