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2013 (11) TMI 320 - ITAT MUMBAIDeduction u/s 80P of the Income Tax Act - Assessee was registered under Multi State Cooperative Societies Act, 1984 and was subsequently notified by Government of Maharashtra as a State Cooperative Bank. The Reserve Bank of India also gave the assessee license under the Banking Regulations Act, 1949 - The RBI cancelled the license w.e.f. 30.10.2003. Thus, the assessee is neither a State Cooperative Society nor it is a Bank under the Banking Regulation Act, 1949 - Assessee filed the return of income declaring the total income "NIL" after making claim of deduction u/s 80P(2)(a)(i) of the Act – Held that:- Assessee was disallowed deduction u/s 80P, as he was prohibited to do banking business by cancellation of licence by RBI. Applicability of provisions of section 176(3)A of the Income Tax Act – Held that:- Question of considering the discontinuation of business does not arise. What happened in the assessee’s case is only cancellation of license to do the banking business, but the assessee is not prevented in doing any other business by the cooperative society. Only the activity of banking was prohibited. Even otherwise, the issue is not whether the income is to be brought to tax as business income or not. The issue is whether the incomes arising out of investment is eligible for deduction under section 80P(2)(a)(i) as of banking business. Therefore, provisions of section 176(3)A does not help the case of assessee. Penalty u/s 271(1)(c) of the Income Tax Act – Held that:- Management of the society knows that the income earned does not qualify the 'banking income' and so is the A.B. Mansinghka & Co., Auditors of the assessee - It is the case, where the assessee has not adopted the advise of the experts(auditors) and proceeded to claim deduction u/s 80P(2) of the Act - Normally, the case is other way around and they(auditors) issue certificates advising the claim of deduction u/s 80P - But in this case, Auditors advised that the impugned income is ineligible to be classified as banking income. But the assessee made a false claim of deduction and decided to provide false explanation in the penalty proceedings u/s 271(1)(c) of the Act – Decided against the Assessee.
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