Section 80P deduction wrongly denied as profits from credit facilities to members qualify for cooperative society benefits

ITAT Ahmedabad allowed assessee's appeals regarding rectification application u/s 154 that was rejected as time-barred. The tribunal held that limitation period begins only when assessee receives the order, and department failed to prove service of intimation u/s 143(1). Since assessee consistently challenged demand notices within four years and department provided no service details, the application was within time. On merits, assessee's Section 80P deduction was wrongly denied as authorities failed to consider that profits included income from providing credit facilities to members, not just bank interest. Matter remanded to AO for fresh consideration with proper hearing opportunity.

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Issues Involved:
1. Rejection of rectification application u/s 154 of the Act.
2. Denial of deduction u/s 80P(2) of the Act.
3. Treatment of interest income as income from other sources.
4. Procedural aspects regarding service of intimation u/s 143(1).
5. Calculation of period of limitation for rectification application.

Summary:

1. Rejection of Rectification Application u/s 154:
The assessee, a Co-operative Society, filed appeals against the CIT(A)'s orders rejecting its rectification application u/s 154 of the Act. The rectification application was filed to correct the denial of deduction u/s 80P(2) in the intimation u/s 143(1). The CIT(A) upheld the Assessing Officer's decision that the application was time-barred.

2. Denial of Deduction u/s 80P(2):
For AYs 2010-11 to 2013-14, the assessee claimed deduction u/s 80P(2) and filed Nil returns. However, the Assessing Officer denied the deduction, treating the income as from other sources. The CIT(A) also confirmed the denial of deduction on merits.

3. Treatment of Interest Income:
The CIT(A) and Assessing Officer treated the interest income earned from FDs in nationalized banks as income from other sources, not eligible for deduction u/s 80P(2)(d). The assessee contended that the interest income was from credit facilities to members, thus eligible for deduction u/s 80P(2)(a)(i).

4. Procedural Aspects Regarding Service of Intimation u/s 143(1):
The assessee argued that the intimation u/s 143(1) was never served, and it only became aware through demand notices. The Department admitted it had no records of the service of intimation. The Tribunal held that without proof of service, the period of limitation for rectification did not start.

5. Calculation of Period of Limitation for Rectification Application:
The Tribunal agreed with the assessee that the rectification application was not time-barred since the intimation was never served. The Tribunal noted that the assessee had continuously sought rectification within the prescribed period and rejected the CIT(A)'s finding of time-barred application.

Conclusion:
The Tribunal set aside the CIT(A)'s order, holding that the assessee's rectification application was within the stipulated time and should be entertained. The issue was restored to the Assessing Officer for fresh consideration, giving due opportunity to the assessee. All appeals were allowed for statistical purposes.

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