Cooperative society without RBI banking license eligible for Section 80P deductions despite Section 80P(4) restrictions

ITAT Mumbai allowed the appeal, condoning a 131-day delay in filing before CIT(A) due to the promoter's health issues. The tribunal held CIT(A) erred in rejecting the condonation application without confronting the appellant. On merits, following Supreme Court precedent in Mavilayi Service Co-operative Bank Ltd., the tribunal ruled that Section 80P(4) restrictions apply only to cooperative societies holding RBI banking licenses. Since the assessee lacked RBI registration or banking license, it remained eligible for deductions under Section 80P(2)(a)(i) for credit facility income and Section 80P(2)(d) for interest from cooperative banks.

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Issues:
1. Delay in filing appeal before CIT(A) and condonation of delay.
2. Disallowance of deduction claimed under Section 80P of the Income Tax Act, 1961.

Analysis:

Issue 1: Delay in filing appeal before CIT(A) and condonation of delay
The Appellant challenged the order passed by the National Faceless Appeal Centre (NFAC) for the Assessment Year 2020-2021, where the CIT(A) dismissed the appeal as being barred by limitation due to a delay of 131 days. The Appellant cited reasons for the delay, including ill health of a promoter and limited knowledge of income tax provisions. The CIT(A) rejected the explanation, stating that ill-health alone could not justify the delay and highlighted a previous timely appeal by the Appellant for another assessment year. However, the Tribunal emphasized the need for substantial justice over technicalities, citing the Collector of Land Acquisition case, and found the Appellant's reasons valid for condonation of delay. The Tribunal set aside the CIT(A)'s order, noting that the Appellant had provided a reasonable explanation for the delay and was not seeking to gain from the delay.

Issue 2: Disallowance of deduction claimed under Section 80P of the Income Tax Act, 1961
The Appellant, a Co-operative Credit Society, claimed deduction under Section 80P of the Act for income derived from providing credit facilities to members and interest/dividend received from co-operative banks. The Assessing Officer denied the deduction, leading to the appeal. The Tribunal referred to relevant judgments, including Mavilayi Service Co-operative Bank Ltd. case and The Pr. Commissioner of Income Tax-17, Mumbai Vs. M/s Annasaheb Patil Mathadi Kamgar Sahakari Patpedhi Maryadit, to support the Appellant's eligibility for the deduction. The Tribunal held that the Appellant was entitled to deductions under Section 80P(2)(a)(i) for income from credit facilities to members and Section 80P(2)(d) for interest from co-operative banks. Relying on previous decisions, the Tribunal allowed all grounds raised by the Appellant and directed the Assessing Officer to grant the deductions claimed under Section 80P of the Act.

In conclusion, the Tribunal allowed the appeal, highlighting the valid reasons for the delay in filing the appeal and the Appellant's entitlement to deductions under Section 80P of the Income Tax Act, 1961.

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