Tribunal remands co-op society classification decision for thorough review

Income Tax Officer, Ward 1, Tiptur. Versus M/s. Sri Udayaravi Souharda Credit Co-operative Ltd., K.R. Extention, Tiptur.

Income Tax Officer, Ward 1, Tiptur. Versus M/s. Sri Udayaravi Souharda Credit Co-operative Ltd., K.R. Extention, Tiptur. - TMI Issues Involved:
1. Entitlement for deduction under Section 80P(2)(a)(i) of the Income Tax Act.
2. Classification of the assessee as a primary co-operative bank or a co-operative credit society.
3. Validity of registration under the Karnataka Souharda Sahakari Act, 1997.
4. Reliance on the decision of CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha.
5. Applicability of the Supreme Court's decision in the case of The Citizen Co-operative Society Ltd. vs. ACIT.
6. Deduction of foreign tour expenses.

Issue-wise Detailed Analysis:

1. Entitlement for Deduction under Section 80P(2)(a)(i):
The primary issue revolves around the assessee's claim for deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer (AO) denied this deduction on the grounds that the assessee was engaged in banking business, classifying it as a primary co-operative bank, which does not qualify for the deduction under Section 80P(2). The CIT (Appeals) reversed this decision, allowing the deduction based on the judgment of the Hon'ble Karnataka High Court in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha.

2. Classification of the Assessee:
The AO classified the assessee as a primary co-operative bank, disqualifying it from the Section 80P(2) deduction. The CIT (Appeals) disagreed, treating the assessee as a co-operative credit society. The Tribunal noted that this classification is crucial as only co-operative societies are eligible for the deduction under Section 80P(2), not co-operatives engaged in banking activities.

3. Validity of Registration under the Karnataka Souharda Sahakari Act, 1997:
The Departmental Representative argued that the assessee, registered under the Karnataka Souharda Sahakari Act, 1997, does not qualify as a co-operative society under the Karnataka Co-operative Societies Act, 1959. The Tribunal highlighted the distinction between 'co-operatives' and 'co-operative societies,' emphasizing that only entities registered under the latter are eligible for Section 80P(2) benefits.

4. Reliance on the Decision in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha:
The CIT (Appeals) relied on the Karnataka High Court's decision in CIT vs. Billuru Gurubasava Pattina Sahakari Sangha Niyamitha to allow the deduction. The Tribunal noted that this decision is pending appeal before the Supreme Court, which adds complexity to the reliance on this precedent.

5. Applicability of the Supreme Court's Decision in The Citizen Co-operative Society Ltd. vs. ACIT:
The Tribunal considered the Supreme Court's decision in The Citizen Co-operative Society Ltd. vs. ACIT, which denied Section 80P(2) deductions to co-operative societies engaged in banking activities. This decision was pivotal in assessing the eligibility of the assessee for the deduction.

6. Deduction of Foreign Tour Expenses:
The CIT (Appeals) directed the AO to allow a deduction of Rs. 30,000 for foreign tour expenses, which the AO had added back. The Tribunal did not delve into this issue in detail, as the primary focus was on the eligibility for Section 80P(2) deductions.

Tribunal's Decision:
The Tribunal set aside the CIT (Appeals) order and restored the matter to the AO for re-examination. The AO was directed to conduct a thorough investigation, considering the legal distinctions between co-operatives and co-operative societies and the implications of the Supreme Court's decision in The Citizen Co-operative Society Ltd. vs. ACIT. The Tribunal emphasized the need for a reasoned and speaking order from the AO after re-examination.

Conclusion:
The Tribunal allowed the Revenue's appeal for statistical purposes, directing a re-examination of the assessee's eligibility for Section 80P(2) deductions. The AO was instructed to consider all aspects, including the legal status of the assessee's registration and relevant judicial precedents, before making a final determination.