2022 (4) TMI 106 - AT - Income Tax

Tribunal rules in favor of co-operative credit society, allowing deduction under Sec. 80P(2)(a)(i)

Shri Doodhganga Credit Souharda Sahakari Ltd. Versus The Income Tax Officer, Ward-1, Nipani, Karnataka

Shri Doodhganga Credit Souharda Sahakari Ltd. Versus The Income Tax Officer, Ward-1, Nipani, Karnataka - TMI Issues Involved:Interpretation of Sec. 80P(2)(a)(i) of the Income Tax Act, 1961 regarding deduction eligibility for a co-operative credit society engaged in providing credit facilities to its members.Detailed Analysis:Issue 1: Eligibility for Deduction under Sec. 80P(2)(a)(i)The appeal concerns the eligibility of a co-operative credit society for deduction under Sec. 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (A.O) disallowed the claim based on the view that the society was akin to a primary co-operative bank and thus ineligible for the deduction post the Finance Act, 2006 amendment. The A.O's decision was upheld by the CIT (Appeals).Analysis: The A.O's contention was that the society fulfilled the conditions of a primary co-operative bank under Sec.56(c)(ccv) of the Banking Regulation Act, 1949, hence ineligible for the deduction. However, the Tribunal disagreed, citing the wider scope of 'attributable to' in Sec. 80P(2)(a)(i) and the judgment in Quepem Urban Credit Society Ltd. case. The Tribunal emphasized that the society's activities were limited to members, not the public, and did not meet the criteria to be classified as a co-operative bank.Issue 2: Classification as Co-operative BankThe primary issue revolves around determining whether the co-operative credit society can be classified as a co-operative bank under the provisions of the Finance Act, 2006, and Sec. 80P(4) of the Income Tax Act, 1961.Analysis: The Tribunal analyzed the definition of 'banking' and distinguished between co-operative banks under the Banking Regulations Act, 1949, and co-operative societies under the Co-operative Societies Act. Referring to the judgment in Shri Vardhaman Urban Co-operative Credit Society Ltd. case, the Tribunal concluded that since the society was not recognized as a bank by the Reserve Bank of India, it could not be considered a co-operative bank. Therefore, the Tribunal held that the society's status as a co-operative credit society exempted it from the provisions of Sec. 80P(4).Conclusion:The Tribunal allowed the appeal, setting aside the disallowance made by the A.O and CIT (Appeals). The judgment emphasized the distinction between co-operative credit societies and co-operative banks, ultimately ruling in favor of the society's eligibility for the deduction under Sec. 80P(2)(a)(i) due to its classification as a co-operative credit society and not a co-operative bank.