Appeal allowed for fresh assessment on cooperative bank status & deductions under section 80P (2)

The Tribunal allowed the appeal filed by the revenue for statistical purposes, remanding the matter to the Assessing Officer for a fresh assessment. The Tribunal emphasized the need to consider conflicting judgments and legal provisions related to the cooperative bank status and eligibility for deductions under section 80P (2). The Tribunal highlighted the importance of distinguishing between funds sourced from the assessee's own funds and liabilities for bank deposits in determining the nature of the assessee Society.

---

---

Issues:
1. Assessment of whether the assessee Society is a cooperative Bank.
2. Eligibility of the assessee for deduction U/s 80P (2).
3. Interpretation of the term "Cooperative Bank" under the Income Tax Act, 1961.
4. Examination of conflicting judgments from Hon'ble Karnataka High Court and Hon'ble Apex Court regarding the nature of funds used for bank deposits.

Analysis:

Issue 1: Assessment of Cooperative Bank Status
The appeal challenges the order of the ld. CIT (A) regarding the nature of the assessee Society as a cooperative Bank. The revenue contends that the Society exhibits characteristics of a bank despite the CIT (A) ruling otherwise. The revenue argues that the insertion of clause (viia) in section 2(24) of the Income Tax Act, 1961 by the Finance Act, 2016 should be considered. The Tribunal noted conflicting judgments from Hon'ble Karnataka High Court and Hon'ble Apex Court, emphasizing the distinction between funds sourced from the assessee's own funds versus liabilities for bank deposits. Due to the lack of discussion on this factual aspect in the lower authorities' orders, the Tribunal set aside the CIT (A) order and remanded the matter to the AO for a fresh decision after examining the facts in light of relevant judgments.

Issue 2: Eligibility for Deduction U/s 80P (2)
The question of whether the assessee is eligible for deduction U/s 80P (2) was raised in the appeal. The revenue disputed the CIT (A) decision, arguing that the assessee is not entitled to the deduction as per the provisions of section 80P. The Tribunal, while remanding the matter to the AO for fresh consideration, directed the AO to assess the applicability of the judgment of the Hon'ble Apex Court in the case of Citizen Co-operative Society Limited vs. ACIT, 397 ITR 1. This judgment was deemed relevant for determining the cooperative bank status of the assessee.

Issue 3: Interpretation of "Cooperative Bank"
The interpretation of the term "Cooperative Bank" under the Income Tax Act, 1961 was a key point of contention in the appeal. The revenue and the assessee presented arguments based on legal precedents from Hon'ble Karnataka High Court and Hon'ble Apex Court. The Tribunal highlighted the need for a thorough examination of the judgments to determine the nature of the assessee Society accurately.

In conclusion, the Tribunal allowed the appeal filed by the revenue for statistical purposes, remanding the matter to the AO for fresh assessment in consideration of the conflicting judgments and legal provisions related to the cooperative bank status and eligibility for deductions under section 80P (2).

---