Cooperative society denied Section 80P(2) deduction for insurance activities as they differ from banking operations

ITAT Hyderabad denied appellant's claim for deduction u/s 80P(2) as activities included micro insurance premium, NPS contribution, and loan insurance premium. The tribunal held that insurance activities are distinct from banking activities and do not fall within section 80P(2) purview, being governed by separate regulatory frameworks. However, the tribunal found AO incorrectly disallowed total receipts instead of income from insurance activities. Matter remanded to AO to verify and disallow only the deduction claimed in return relating to insurance activities. Appeal allowed for statistical purposes.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction under section 80P(2) of the Income Tax Act, 1961.

Condonation of Delay:
The appeal filed by the assessee was barred by a delay of 581 days. The assessee requested the bench to condone the delay, citing the lockdown imposed by the central government due to Covid-19 as the reason. The Tribunal relied on the case laws of Collector Land Acquisition Vs. Mst. Katiji & Ors and University of Delhi Vs. Union of India, holding that the delay, supported by cogent reasons, deserved to be condoned to ensure substantial justice. Consequently, the delay was condoned, and the case was taken up for adjudication on merits.

Eligibility for Deduction under Section 80P(2):
The assessee, a Co-operative Society providing credit facilities to its members, claimed a deduction of Rs. 38,22,781/- under section 80P of the Act. The Assessing Officer disallowed the deduction, stating that the income was from business activities not covered under section 80P, such as micro insurance premiums, NPS contributions, and loan insurance premiums. The Commissioner of Income Tax (Appeals), NFAC, Delhi upheld the Assessing Officer's decision, noting that the majority of the assessee's receipts were from insurance-related activities and commissions, which do not fall under the purview of section 80P.

Tribunal's Decision:
The Tribunal examined the provisions of section 80P and concluded that the activities of the assessee, primarily in the nature of insurance, do not qualify for deduction under section 80P(2). The Tribunal held that banking and insurance activities are distinct and governed by different Acts, and thus, insurance activities cannot be presumed to be part of banking activities. However, the Tribunal remanded the matter back to the Assessing Officer to disallow the deduction claimed in the return of income specifically related to insurance activities. The Assessing Officer was directed to verify the deduction claimed and pass a fresh order after providing an opportunity of hearing to the assessee. The appeal was allowed for statistical purposes.

Conclusion:
The appeal was allowed for statistical purposes, with the matter remanded back to the Assessing Officer for limited verification and fresh adjudication regarding the deduction claimed under section 80P related to insurance activities. The order was pronounced in the Open Court on 17th October, 2023.

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