COMMISSIONER OF INCOME TAX - II vs. S K DISTRICT TELECOM EMPLOYEE CO-OP CREDIT SOCIETY LTD

Facts

The Revenue, Commissioner of Income Tax - II, has appealed against the order of the Income Tax Appellate Tribunal (ITAT) dated January 31, 2014, for Assessment Year 2009-10. The ITAT had confirmed the order of the CIT(A), which allowed the assessee, S K District Telecom Employee Co-Op Credit Society Ltd., a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. This decision resulted in the deletion of an addition of Rs. 35,14,938/- made by the Assessing Officer. The appeal is before the High Court of Gujarat.

Held

The High Court dismissed the appeal filed by the revenue. The Court noted that the ITAT had relied on this Court's decision in the case of Commissioner of Income Tax Vs. Jafari Momin Vikas Co-operative Credit Society Ltd. The High Court found that the decision in Jafari Momin Vikas Co-operative Credit Society Ltd. was squarely applicable. In that case, the Division Bench had observed that Sub-Section (4) of Section 80P would not apply to the assessee, which is not a Co-operative Bank. The Court affirmed that Section 80P(4) excludes co-operative banks, but not credit societies that are not co-operative banks. Since the respondent-assessee was admittedly a credit co-operative society and not a credit co-operative bank, the exclusion under Section 80P(4) was not applicable. Therefore, the High Court saw no reason to interfere with the ITAT's order and held the proposed substantial question of law against the revenue.

Key Issues

1. Whether the appellate tribunal has substantially erred in confirming the order of the CIT(A) holding that the assessee is entitled to deduction under Section 80P(2)(a)(i) of the Act thereby deleting the addition of Rs.35,14,938/-? Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue argued that the assessee is not entitled to the deduction under Section 80P(2)(a)(i). The revenue relied on Section 80P(4) of the Act, contending that it excludes credit societies that are not co-operative banks from the benefit of deduction under Section 80P. The revenue's argument was that Section 80P(4) would exclude not only co-operative banks other than those fulfilling specific descriptions but also credit societies which are not co-operative banks.