2022 (6) TMI 561 - AT - Income Tax

Cooperative Bank denied tax deduction under section 80P by Tribunal - CIT(A) decision upheld

N.E. Railway Employees Multi State Primary Co-operative Bank Ltd. Versus ACIT, Range-1, Gorakhpur

N.E. Railway Employees Multi State Primary Co-operative Bank Ltd. Versus ACIT, Range-1, Gorakhpur - TMI Issues Involved:1. Whether the CIT(A) was justified in upholding the disallowance of deduction claimed under section 80P of the Income Tax Act.2. Interpretation and applicability of section 80P(4) of the Income Tax Act to the assessee.3. The nature and classification of the assessee as a Cooperative Bank under the Banking Regulation Act, 1949.Issue-wise Detailed Analysis:1. Justification of CIT(A) in Upholding the Disallowance of Deduction under Section 80P:The primary issue in these appeals is whether the CIT(A) was justified in upholding the disallowance of the deduction claimed under section 80P of the Income Tax Act. The assessee, a primary Cooperative Bank/Credit Society established under the Indian Railway Establishment Manual, filed its returns declaring nil income after claiming deductions under section 80P. The Assessing Officer (AO) disallowed these claims, stating that section 80P does not apply to any Cooperative Bank other than a primary agriculture credit society or a primary Cooperative Agriculture and Rural Development Bank. The CIT(A) upheld the AO's decision, leading to the present appeals.2. Interpretation and Applicability of Section 80P(4) of the Income Tax Act:The AO issued a notice under section 142(1) and, after considering the assessee's response, referred to sub-section 4 of section 80P, inserted by the Finance Act, 2006, effective from the assessment year 2007-08. The AO observed that the assessee, being a Cooperative Bank as per the Banking Regulation Act, 1949, did not qualify for the deduction under section 80P due to the provisions of section 80P(4). The CIT(A) concurred with this interpretation, stating that the assessee is listed as a non-scheduled urban cooperative bank as per the Reserve Bank of India (RBI) website and is thus not eligible for the deduction under section 80P(2)(a)(i).3. Nature and Classification of the Assessee as a Cooperative Bank:The assessee contended that it is a Cooperative Credit Society, not a primary Cooperative Bank, and thus should be eligible for the deduction under section 80P. However, the AO and CIT(A) noted that the assessee was granted a banking license by the RBI and was functioning as a Cooperative Bank. The CIT(A) referred to the Banking Regulation Act, 1949, which defines a Cooperative Bank and excludes such banks from the benefits of section 80P. The Tribunal upheld this classification, stating that the assessee's activities and the license granted by the RBI confirmed its status as a Cooperative Bank, making it ineligible for the deduction under section 80P.Tribunal's Conclusion:The Tribunal concluded that the assessee, being a Multi-State Primary Cooperative Bank, falls within the mischief of sub-section 4 of section 80P and is thus not eligible for the deduction under section 80P of the Income Tax Act. The Tribunal upheld the orders of the CIT(A) for the assessment years 2009-10, 2013-14, and 2014-15, dismissing the appeals of the assessee.Final Order:The appeals of the assessee for the assessment years 2009-10, 2013-14, and 2014-15 were dismissed, and the order was pronounced on 09/06/2022 at Allahabad, U.P., in accordance with Rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1963.