2018 (10) TMI 1121 - AT - Income Tax

Co-op Bank denied tax deduction for multi-Taluk operation under Income Tax Act

The Tribunal upheld the denial of deduction u/s 80P of the Income Tax Act for the appellant, a Co-operative Agricultural and Rural Development Bank, for ... Eligibility for deduction u/s. 80(P) denied - area of operation not confined to ‘a taluk' - amended clause 80P(4) - Impact of article 'a' used therein - providing credit facilities to its members for Agricultural And allied Rural Development activities - Held that:- Explanation (b) to section 80P(4) is a defining provision employing the word ‘means’. The Hon’ble Apex Court in the case of West Bengal State Warehousing Corporation vs. Indrapuri Studio Pvt. Ltd [2010 (10) TMI 1059 - SUPREME COURT] held that when the word ‘means’ is used in a definition, it signifies strict interpretation. It is trite law that an exemption provision is to be strictly construed. Moreover, the Cardinal rule of construction is that a provision must be given its ordinary meaning. Natural and ordinary meaning of words should not ordinarily be departed from. The words “having its area of operation confined to a taluk” obtained in the Explanation (b) to sub-section (4) of Section 80P should be understood as ‘limited to’ or ‘within bounds’ of a taluk. The first letter of the English alphabet which precedes the word ‘Taluk’ is used “before nouns and noun phrases that denote a single, but unspecified, person or thing…….”. [Webster’s Dictionary] ’A’ is used to mean or denote ‘one’. A Taluk is a revenue division. Few villages constitute a taluk and few taluks constitute a District. The mischief of sub-section (4) will not fall on a primary cooperative agricultural and rural development bank provided it’s operation is limited to a taluk and the principal object of which is to provide for long term credit for agricultural and rural development activities. Since the assessee’s area of operation was not confined to a Taluk for the relevant assessment year, we hold that it was not entitled to the benefit of deduction u/s. 80P(2) As relying on assessee's own case for the immediately assessment year 2010-2011 we hold that the Income-tax authorities are justified in denying the assessee the benefit of deduction u/s 80P(2) of the I.T.Act, for the impugned year, as well. - Decided against assessee. Issues:1. Eligibility of the appellant for deduction u/s. 80(P) of The Income Tax Act 1961.2. Interpretation of Section 80(P)(4)(b) relating to the expression 'A Society having its area of operation confined TO 'A' TALUK.'3. Applicability of the amendment made to Sec. 80(P) by insertion of subsection (4) w.e.f 01.04.2007.4. Whether the appellant is entitled to the benefit of deduction u/s 80P(2) of the I.T.Act.Eligibility of the Appellant for Deduction u/s. 80(P) of The Income Tax Act 1961:The appellant, a Co-operative Agricultural and Rural Development Bank, filed an appeal against the CIT(A)'s order denying the deduction u/s 80P for the assessment year 2011-2012. The appellant argued that as a primary Co-operative Agricultural & Rural Development Bank, it met the criteria for deduction u/s 80P(2)(a)(i) & (d) of the Income Tax Act. The appellant contended that it provided credit facilities for Agricultural and Allied Rural Development Activities in specific Taluks. The Assessing Officer's interpretation of Section 80(P)(4)(b) was challenged by the appellant, citing relevant case laws to support their position.Interpretation of Section 80(P)(4)(b) - 'A Society having its area of operation confined TO 'A' TALUK':The Tribunal analyzed the definition of 'Primary Cooperative Agricultural and Rural Development Bank' under Explanation (b) to section 80P(4) of the I.T. Act. The Tribunal emphasized that the provision should be strictly construed, and the ordinary meaning of words must be applied. The Tribunal interpreted the expression 'having its area of operation confined to a taluk' to mean limited to or within the bounds of a taluk. Based on this interpretation, the Tribunal concluded that since the appellant's area of operation extended beyond a single Taluk, it was not entitled to the benefit of deduction u/s 80P(2) of the Act.Applicability of the Amendment to Sec. 80(P) Inserted w.e.f 01.04.2007:The appellant argued that the amendment made to Sec. 80(P) by inserting subsection (4) w.e.f 01.04.2007 did not restrict the applicability of the section to Agricultural and Rural Development Banks operating in more than one Taluk. The appellant contended that the usage of the article 'a' before the word Taluk did not signify a single Taluk. The appellant relied on judicial pronouncements to support their interpretation of the amendment.Entitlement to Deduction u/s 80P(2) of the I.T. Act:Considering the Tribunal's decision in the appellant's own case for the preceding assessment year, where the benefit of deduction u/s 80P(2) was denied, the Tribunal upheld the Income-tax authorities' decision to deny the appellant the benefit of deduction for the current year as well. The Tribunal concluded that since the appellant's area of operation was not confined to a Taluk, it was not entitled to the deduction u/s 80P(2) of the I.T. Act.In conclusion, the Tribunal dismissed the appeal filed by the appellant, upholding the denial of the deduction u/s 80P of the Income Tax Act for the assessment year 2011-2012 based on the appellant's area of operation extending beyond a single Taluk.