ITO 17(2)(3), MUMBAI vs. THE MAHARASHTRA MANTRALIYA VA SANLAGANA SHASKIYA KARAMCHARI CO.OP.CREDIT SOCIETY LTD., MUMBAI

ORDER

PER N.K. PRADHAN, AM

The Maharashtra Mantraliya 2 & 3476/Mum/2018

filed by the revenue read as under:

1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that deduction u/s 80P(2)(i)(ia) is allowable, an addition made on account of disallowance of expenditure debited to the P & L a/c is required to be covered under provisions of section 80P of the Income Tax Act, 1961, even when it is settled principle that the deeming fiction created under any provisions of the Act cannot be imported into a beneficial provisions of the Act.

2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction u/s 80P without considering insertion of section 80P(4) and sub-clause (viia) to section 2(24) vide Finance Act, 2006 w.e.f. 01.4.2007.

3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in allowing deduction u/s 80P without considering the facts that the assessee fulfils all the three conditions laid down u/s 56(c)(ccv) of Part V of the Banking Regulation Act, 1949 and therefore, falls in the category of a primary co-operative bank.

3. Briefly stated the facts are that the assessee is a Co-operative Credit Society engaged in the business of accepting and lending moneys to its Members only in the normal course of its activities. In the computation of total income, the assessee has claimed deduction of Rs.2,32,79,304/- u/s 80P(2)(a)(i) of the Act. During the course of assessment proceedings, the Assessing Officer (AO) observed that the deduction allowable u/s 80P(2)(i) in the case of Co-operative Credit Society engaged in carrying of the business of banking (Co-operative Banks) has been withdrawn from the assessment year (AY) 2007-08, except in the case of primary agricultural credit society or a primary co-operative agricultural and rural development bank. Referring to the The Maharashtra Mantraliya 3 & 3476/Mum/2018 relevant provisions of Maharashtra Co-operative Societies Act, 1960; Part V of the Banking Regulation Act, 1949; and section 80P(2)(a)(i) of the Income Tax Act, the AO held that (i) the assessee is a Co-operative Bank other than a primary agricultural credit society or a primary co- operative agricultural and rural development bank, (ii) the assessee fulfils the condition laid down in section 56(c)(ccv) of Part V of the Banking Regulation Act, 1949 for being a Co-operative Bank. Considering the above facts, the AO disallowed the claim of deduction made by the assessee u/s 80P of the Act.

4. In appeal, the Ld. CIT(A), considering the order passed by the ITAT for AY 2010-11 in the case of the assessee allowed the appeal filed by the assessee.

5. Before us, the Ld. DR submits that the AO in the instant case has rightly made the disallowance of deduction claimed by the assessee u/s 80P of the Act by referring to the Maharashtra Co-operative Societies Act, 1960, Banking Regulation Act, 1949 and the provisions of section 80P of the Income Tax Act. It is argued by him that in the present case the Ld. CIT(A) has erred in allowing deduction u/s 80P without considering insertion of section 80P(4) and sub-clause (viia) to section 2(24) vide Finance Act, 2006 w.e.f. 01.04.2007. Thus it is stated that the order of the Ld. CIT(A) be set aside and the order passed by the AO be restored.