2024 (6) TMI 276 - AT - Income Tax

Assessee eligible for Section 80P deduction as not co-operative bank, retirement benefit disallowances upheld

Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. Versus Asst. CIT, Circle - 1 (2) Trivandrum And (Vice-Versa)

The ITAT Cochin held that the assessee was eligible for deduction under Section 80P(1) read with Section 80P(2)(a)(i) for AY 2010-11 and 2011-12. The SC ... Deduction u/s. 80P(1) r.w.s. 80P(2)(a)(i) - claim stands denied to it on account of applicability of s. 80P(4) - HELD THAT:- Hon'ble Apex Court which, vide it’s order [2023 (9) TMI 761 - SUPREME COURT] has clarified that the assessee is not a co-operative bank and, therefore, the prescription of s. 80P(4) of the Act, excluding co-operative banks from the purview of s. 80P, would not apply thereto. Thus assessee held as not a co-operative bank, which was for AY 2007-08, would be eligible for deduction u/s. 80P(1) r/w s. 80P(2)(a)(i), subject of course to fulfillment of the conditions of the latter provision. The assessment years before us are AYs. 2010-11 and 2011-12. There is nothing on record to show that the bye-laws of the assessee-bank have undergone any change over the interim, i.e., post 31/3/2007, for which year the matter travelled to and stands decided by the Hon’ble Apex Court. Even as we would ordinarily have, as a matter of abundant caution, made the allowance of deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) subject to no change therein impacting the assessee’s claim of not being a cooperative bank, there being no reference in the assessment or the appellate orders to any clauses of the bye-laws, so that the same, as indeed the assessee’s activities remain the same as for the earlier years. The matter thus gets settled in assessee’s favour and we accordingly hold it to be eligible for deduction as claimed as the only reason we find in the order by the Revenue authorities, denying the said deduction is of the assessee being a co-operative bank. This decides the principal ground/s, both qua the assessee and Revenue’s appeal for both the years. Payment to staff retirement benefit, disallowance with reference to sec 36(1)(iv)/(v) - HELD THAT:- Fund/s is admittedly not approved, validating the disallowance/s. So, however, as explained by Shri Jacob during hearing, the said disallowance/s would stand subsumed in the larger deduction u/s. 80P(1) that would, on account of the disallowance/s, be available. We wholly agree inasmuch as the said deduction is with reference to the gross total income as defined u/s. 80B(5). The disallowance/s would though stand to be upheld, even as the assessee shall be allowed deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) on the profits assessed u/s. 28(i) as forming part of GTI computed upon the effecting the said disallowance/s. Interest on income tax refund - There is no merit in the assessee’s case for not confirming the same, being decidedly in the nature of income. That apart, the same falls to be assessed as income from other sources, u/s. 56 and, accordingly, would not be subject to deduction u/s. 80P. Issues:Entitlement to deduction u/s. 80P(1) r.w.s. 80P(2)(a)(i) of the Income Tax Act, 1961.Analysis:The judgment by the Appellate Tribunal ITAT Cochin involves cross appeals by the Assessee and the Revenue regarding orders dated 30.01.2015 and 28.11.2014 by the Commissioner of Income Tax (Appeals), Trivandrum, related to assessments under section 143(3) of the Income Tax Act for AYs. 2010-11 and 2011-12. The main issue revolves around the entitlement of the assessee to deduction u/s. 80P(1) r.w.s. 80P(2)(a)(i) of the Act, which was denied due to the applicability of s. 80P(4) claimed by the Revenue on the grounds that the assessee is in the business of banking. However, the Hon'ble Apex Court clarified that the assessee is not a cooperative bank and, therefore, the exclusion under s. 80P(4) does not apply. The judgment extensively discusses the definition of a cooperative bank under various Acts and concludes that the appellant is not a cooperative bank within the meaning of the relevant provisions.The Tribunal held that since the assessee has been established as not a cooperative bank by the Hon'ble Apex Court, it is eligible for deduction u/s. 80P(1) r.w.s. 80P(2)(a)(i) for the assessment years 2010-11 and 2011-12. The Tribunal found no change in the bye-laws of the assessee-bank post the earlier decision by the Hon'ble Apex Court, and thus, allowed the deduction as claimed by the assessee. Additionally, the Tribunal addressed other disallowances and additions, including retirement benefit payments and interest on income tax refund, and made appropriate decisions on each issue.In conclusion, the Tribunal allowed the assessee's appeals for AYs. 2010-11 & 2011-12 and partly allowed the Revenue's appeals. The judgment provides a detailed analysis of the legal provisions and previous court decisions to support the final decision in favor of the assessee's entitlement to deduction under section 80P of the Income Tax Act.