Cooperative society eligible for tax deduction under section 80P(2)(a)(i) affirmed by ITAT

The ITAT Bangalore Bench dismissed the Revenue's appeals, affirming the eligibility of the cooperative society for deduction under section 80P(2)(a)(i) of the Income Tax Act for income earned from providing credit facilities to its members. The CIT(Appeals) decision was upheld, emphasizing the distinction between cooperative societies and cooperative banks, supported by relevant case law and tribunal orders. The ITAT clarified that the High Court's order was binding, and the Revenue's appeals were dismissed accordingly.

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Issues:
Interpretation of provisions under section 80P of the Income Tax Act for cooperative societies providing credit facilities to members.

Analysis:
The main issue in this case revolved around the interpretation of section 80P of the Income Tax Act concerning cooperative societies providing credit facilities to their members. The Revenue challenged the order of the CIT(Appeals) on the grounds that the cooperative society in question was not entitled to deduction under section 80P(2)(a)(i) as it was considered akin to cooperative banks due to amendments in the Banking Regulation Act. The Assessing Officer (AO) disallowed the deduction under section 80P, adding the entire income as income from other sources. The CIT(Appeals), however, allowed the deduction and deleted the addition after considering various judgments and distinguishing between cooperative societies and cooperative banks.

The key argument put forth by the Revenue was that the cooperative society should not be eligible for deduction under section 80P as it was akin to cooperative banks due to the amendments in the Banking Regulation Act. The AO held that the provisions of section 80P(4) did not allow cooperative societies engaged in banking activities to claim deduction under section 80P. However, the CIT(Appeals) disagreed with this interpretation and held that cooperative societies were distinct from cooperative banks, allowing for the deduction under section 80P(2)(a)(i) for the income earned by the cooperative society providing credit facilities to its members.

The CIT(Appeals) based their decision on the judgment of the jurisdictional High Court and previous tribunal orders, emphasizing that cooperative societies were entitled to the deduction under section 80P(2)(a)(i) as the income was attributable to the activities mentioned in the provision. They highlighted that the interest income earned by the cooperative society from deposits made with other cooperative banks/societies was fully deductible under section 80P(2)(a)(i). The CIT(Appeals) also noted that the interest earned on deposits with cooperative banks would be eligible for deduction under section 80P(2)(d) of the Act.

Ultimately, the ITAT Bangalore Bench dismissed the appeals of the Revenue, upholding the decision of the CIT(Appeals) based on the judgments of the jurisdictional High Court and previous tribunal orders. The ITAT emphasized that the filing of an SLP did not amount to a stay of the High Court's order, and therefore, they were bound to follow the judgments of the jurisdictional High Court. Consequently, the appeals of the Revenue were dismissed, affirming the eligibility of the cooperative society for deduction under section 80P(2)(a)(i) for the income earned from providing credit facilities to its members.

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