2020 (3) TMI 117 - AT - Income Tax

Tribunal remands case for fresh assessment on deduction eligibility & classification.

The Tribunal allowed the appeals for statistical purposes and remanded the matter back to the AO for fresh adjudication on the eligibility of the ... Disallowance of deduction u/s 80P - HELD THAT:- As decided in M/S. SINDHU CREDIT SOUHARDA SAHAKARI NIYAMITA [2019 (12) TMI 1277 - ITAT BANGALORE] Assessee’s claim regarding deduction u/s. 80P(2)(a)(i) cannot be rejected on this basis that assessee is a Souharda Sahakari and therefore, cannot be regarded as a co-operative society. But after holding so, set aside the order of CIT(A) and restore the matter back to the AO for fresh decision regarding allowability of deduction u/s. 80P(2)(a)(i) after examining other conditions for allowing such deduction because those conditions are not examined by the AO till now. Issues Involved:1. Denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act.2. Classification of the appellant as a Co-operative Society.3. Eligibility of interest income for deduction under Section 80P(2)(a)(i).4. Adequacy of the CIT(A)'s reasoning and adherence to judicial precedents.5. Applicability of the Karnataka High Court decision in CIT Vs Sri Bilure Gurubasava Pattina Sahakari Sangha Niyamita.6. Levy of interest under Section 234A.Detailed Analysis:1. Denial of Deduction under Section 80P(2)(a)(i):The primary issue revolves around the denial of the deduction claimed by the appellant under Section 80P(2)(a)(i) of the Income Tax Act. The appellant, a Co-operative Society registered under the Karnataka Souharda Sahakari Act, 1997, had claimed a deduction of Rs. 18,95,288, which was disallowed by the Assessing Officer (AO) during the scrutiny assessment under Section 143(3). The CIT(A) upheld the AO's decision, leading the appellant to appeal before the Tribunal.2. Classification as a Co-operative Society:The appellant contended that it should be considered a Co-operative Society entitled to the deduction under Section 80P(2)(a)(i). The Tribunal referred to a similar case, M/s. Sindhu Credit Souharda Sahakari Niyamita v. ITO, where it was held that Souharda Co-operatives, registered under the Karnataka Souharda Sahakari Act, 1997, operate on the principles of cooperation and should be regarded as Co-operative Societies under the Income Tax Act.3. Eligibility of Interest Income for Deduction:The CIT(A) had concluded that the interest income earned by the appellant was not eligible for deduction under Section 80P(2)(a)(i). However, the Tribunal noted that the CIT(A) failed to specifically adjudicate this matter despite the appellant's plea. The Tribunal emphasized that the issue of whether the interest income qualifies for deduction needs to be examined afresh by the AO.4. Adequacy of CIT(A)'s Reasoning and Judicial Precedents:The appellant argued that the CIT(A) did not provide a reasoned, speaking order explaining why the judicial precedents relied upon by the appellant could not be applied. The Tribunal highlighted the necessity for the CIT(A) to provide clear reasons when deviating from judicial precedents and remanded the matter back to the AO for a fresh decision, taking into account relevant judicial precedents.5. Applicability of Karnataka High Court Decision:The appellant cited the Karnataka High Court's decision in CIT Vs Sri Bilure Gurubasava Pattina Sahakari Sangha Niyamita, arguing that the decision should be binding as long as the facts are similar. The Tribunal acknowledged this point and directed the AO to consider the High Court's decision during the fresh adjudication.6. Levy of Interest under Section 234A:The appellant raised an issue regarding the levy of interest under Section 234A, asserting that the AO failed to observe the due date of filing the return under Section 139(1). The Tribunal did not specifically address this issue but included it in the remand for the AO's fresh consideration.Conclusion:The Tribunal allowed the appeals for statistical purposes and remanded the matter back to the AO for fresh adjudication on the eligibility of the deduction under Section 80P(2)(a)(i), the classification of the appellant as a Co-operative Society, the eligibility of interest income for deduction, and the application of relevant judicial precedents. The AO is directed to re-examine these issues in light of the Tribunal's observations and applicable legal principles.