2024 (10) TMI 27 - AT - Income Tax

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

Ajinkyatara Sahakari Patsanstha Maryadit Versus Income Tax Officer, Ward 28 (1) (1), Maharashtra

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 ... Delay in filling appeal before CIT(A) - promoter and managing director of the society was having health issues which resulted in delay in filing appeal before the CIT(A) - HELD THAT:- Appellant was not set to gain by delaying the filing of appeal before the CIT(A). In view of the explanation provided by the Appellant, the delay of 131 days in filing the appeal before CIT(A) deserved to be condoned. In any case, in our view, CIT(A) was not justified in rejecting the application for condonation of delay without first confronting the Appellant. Therefore, the order passed by the CIT(A) dismissing the appeal as being barred by limitation in set aside. Deduction u/s 80P(2)(a)(i) - income of the Co-operative Credit Societies attributable to providing credit facilities to the members - Issue raised in the present appeal, on merits, stands decided in favour of the Assessee by the judgment of Mavilayi Service Co-operative Bank Ltd. [2021 (1) TMI 488 - SUPREME COURT] wherein it was held that the provision of Section 80P(4) of the Act are attracted only in case of co-operative society holding a banking license issued by the Reserve Bank of India (RBI). It is not the case of the Revenue that the Assessee is either registered with RBI under Banking Regulation Act, 1949 and/or holds banking license issued by RBI. Therefore, provisions of Section 80P(4) of the Act would not get attracted in the present case and the Appellant would be eligible to claim deduction under Section 80P of the Act. As regards profits and gains earned by the Appellant from the business of provide credit facility to its members, the Appellant would be entitled to deduction under section 80P2(a)(i) of the Act. Whereas in respect of interest received from Co-operative Bank, the Appellant would be entitled to deduction u/s 80P2(d) of the Act since a co-operative bank continues to be a co-operative society as held in the case of NPC Employees Cooperative Credit Society Limited [2024 (6) TMI 1402 - ITAT MUMBAI]. Thus direct the AO to grant deduction u/s 80P(2)(a)/80P(2)(d) of the Act as claimed by the Appellant - Assessee appeal allowed. 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 delayThe 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, 1961The 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.