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Facts
The assessee, a co-operative society, did not file a regular return for AY 2010-2011. The AO initiated reassessment under Section 148, denying the Section 80P deduction and completing assessment under Section 143(3) read with Section 147, on the grounds that the assessee was a co-operative bank and thus ineligible. The CIT(A) upheld the AO's decision.
Held
The Tribunal, relying on the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd., held that since the assessee-society does not possess a banking license, it cannot be classified as a co-operative bank. Consequently, the Tribunal directed the AO to allow the deduction claimed under Section 80P(2)(a)(i) of the Income-tax Act.
Key Issues
The eligibility of a co-operative society for deduction under Section 80P, specifically whether it should be treated as a co-operative bank and denied the deduction under Section 80P(2)(4) due to not possessing a banking license.
Sections Cited
80P, 80P(2), 80P(2)(4), 80P(2)(a)(i), 147, 148, 143(3)
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Income Tax Appellate Tribunal, “SMC” BENCH, COCHIN
Before: Shri Inturi Rama Rao
Asst.Year 2010-2011 M/s.Lokamleswaram Service Co- The Income Tax Officer operative Bank Limited No.249 v. Ward – 2(5) Kodungallur Thrissur.. Thrissur – 680 664. PAN : AAAAL8848G. (Appellant) (Respondent) Appellant by : Sri.O.D.Sivadas, Advocate Respondent by : Smt.Leena Lal, Senior AR Date of Date of Hearing : 10.02.2025 Pronouncement : 13.02.2025 O R D E R This appeal filed by the assessee is directed against the order of the National Faceless Assessment Centre / Commissioner of Income- tax (Appeals) [“CIT(A)” for short] dated 11.11.2024 having DIN & Order No.ITBA/APL/S/250/2024-25/1070245605(1) for the assessment year 2010-2011.
There is a delay of 20 days in filing the present appeal before the Tribunal. The assessee filed a condonation petition along with an affidavit of the Secretary of the assessee-society. On perusal of the averments made in condonation petition, I find that there is reasonable cause in filing the appeal belatedly and no latches can be attributed to the assessee. Therefore, the delay is condoned by going by the decision . M/s.Lokamaleswaram SC.B Limited of the Hon’ble Supreme Court in the case of Collector Land Acquisition v. Mst.Katiji & Ors. (1987) 167 ITR 471 (SC), and the appeal is admitted for adjudication.
Briefly, the assessee is a co-operative society registered under the Kerala Co-operative Societies Act. It is engaged in the business of providing credit facilities to the members of the assessee-society only. The assessee not filed any regular return of income for the assessment year 2010-2011. The Assessing Officer (“the AO” hereinafter) formed an opinion that the income had escaped to tax as the assessee’s business income is not eligible for deduction u/s.80P by virtue of the provisions of sub-section (4) of section 80P(2) of the Income-tax Act, 1961 (“the Act” hereinafter) and also in view of the judgment of the Hon’ble jurisdictional High Court in the case of 363 ITR 268. Accordingly, notice u/s.148 of the Act was issued to the assessee on 29th March, 2017. In response to the said notice, the assessee filed the return of income on 5th May, 2017 declaring `Nil’ income after claiming deduction u/s.80P of the Act amounting to Rs.2,76,720. Against the said return, the AO completed the assessment vide order dated 18.12.2017 passed u/s.143(3) r..s. 147 of the Act at a total income of Rs.2,76,720, denying the deduction claimed u/s.80P of the Act on the ground that the assessee-society is a co-operative bank. Being aggrieved, the appeal was filed an appeal before the CIT(A), who upheld the action of the AO placing reliance on the provisions of section 80P2(4) of the Act.
. M/s.Lokamaleswaram SC.B Limited 4. Being aggrieved, the assessee is in appeal before me and submitted that in view of the decision of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. & Ors. v. CIT & Anr. Reported in (2021) 431 ITR 1 (SC), which has overruled the reasoning of the AO.
I have heard the rival submissions and perused the material available on record. On a careful perusal of the orders of the AO as well as the CIT(A), it would be evident that the lower authorities have denied the deduction u/s.80P holding that the assessee is a co-operative bank. Undisputedly, the assessee-society does not enjoy banking licenses, therefore, cannot be classified as a co-operative bank in view of the judgment of the Hon’ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. (supra). The decision relied upon by the AO had been overruled by the Hon’ble SC in the case of Mavilayi Service Co-operative Bank Ltd. (supra). Therefore, I am of the considered opinion that the assessee-society is entitled for deduction u/s.80P of the Act and accordingly direct the AO to allow the deduction u/s.80P(2)(a)(i) of the Act.
In the result, the appeal filed by the assessee is allowed.