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2017 (5) TMI 1162 - AT - Income TaxAllowability of deduction u/s 80P - Held that - Assessee is only providing credit facilities among its members and is not doing any banking activity and the bye laws of the Assessee also restricts its activities as being confined to members only and the Assessee also did not carry out any activities with anyone other than the members of the Society. The Assessee is only a Cooperative Society providing credit facilities to its members and not a Cooperative Bank to deny the deduction u/s 80P of the Act. The Revenue could not rebut the findings of the Ld. CIT (Appeals) and show us that how the Assessee falls under a Cooperative Bank and the Assessee is carrying on banking activities in general and with public. Thus we sustain the order of the Ld. CIT (Appeals) and reject the ground of the Revenue. - Decided in favour of assessee.
Issues Involved:
1. Allowability of deduction under Section 80P of the Income Tax Act to the Assessee. 2. Determination of whether the Assessee is a cooperative bank or a cooperative society. Detailed Analysis: Issue 1: Allowability of Deduction under Section 80P The primary issue in the Revenue's appeal is whether the Assessee, a cooperative society, is entitled to deduction under Section 80P of the Income Tax Act. The Assessee claims this deduction on the grounds that it is a cooperative society engaged in providing credit facilities to its members, not a cooperative bank conducting banking business. Issue 2: Determination of Cooperative Bank vs. Cooperative Society The Assessee argues, supported by the decision of the Bombay High Court in the case of Quepem Urban Cooperative Credit Society Ltd., that it is not a cooperative bank but a cooperative society. The Assessee's activities are limited to providing credit facilities to its members, and it does not engage in banking activities with the general public. The Revenue, however, relies on the Supreme Court's decision in the case of Totgars’ Cooperative Sale Society Limited, which dealt with the issue of interest on surplus funds and its eligibility for deduction under Section 80P(2)(a)(i). Decision Analysis: The Tribunal examined the rival submissions and the decisions relied upon. It found that the Supreme Court's decision in Totgars’ Cooperative Sale Society Limited was not applicable to the present case, as it dealt with interest on surplus funds, not the eligibility of a cooperative society providing credit facilities to its members for deduction under Section 80P. The Tribunal noted that the Assessing Officer (AO) had failed to provide evidence that the Assessee was engaged in banking activities. The AO's assertion that the Assessee was a cooperative bank was based on the fact that it accepted deposits and advanced loans to its members. However, the Tribunal pointed out that accepting deposits and advancing loans to members alone does not constitute banking business. The Assessee's bye-laws restrict its activities to its members, and it is not authorized to accept deposits from or provide loans to the general public. The Tribunal also referred to the decision of the Bombay High Court in Quepem Urban Cooperative Credit Society Ltd., which held that a cooperative society providing credit facilities to its members is entitled to deduction under Section 80P(2)(a)(i). The Tribunal found that the Assessee's case was similar to the cases decided by the ITAT Nagpur and Panaji Benches, where cooperative societies providing credit facilities to their members were not considered cooperative banks. The Tribunal concluded that the Assessee is a cooperative society and not a cooperative bank. Therefore, it is eligible for deduction under Section 80P(2)(a)(i). The Revenue could not rebut the findings of the CIT (Appeals) or demonstrate that the Assessee was carrying on banking activities with the general public. Conclusion: The Tribunal upheld the CIT (Appeals)'s order, allowing the Assessee's claim for deduction under Section 80P(2)(a)(i) and rejecting the Revenue's appeal. The Cross Objection filed by the Assessee in support of the CIT (Appeals)'s order was dismissed as infructuous. The decision was pronounced in the open court on May 8, 2017.
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