ADDL. CIT, BULANDSHAHR vs. M/S. ZILA SAHKARI BANK LTD, BULANDSHAHR

O R D E R PER PRASHANT MAHARISHI, A. M. 1. This is an appeal filed by the revenue against the order of the ld CIT(A), Meerut dated 20.09.2013 for the Assessment Year 2007-08. 2. The Revenue has raised the following grounds of appeal:- “1. That the ld CIT(A) has failed to notice that section 80P of the IT Act was amended by the Finance Act, 2006 with effect from 01.04.2007 introducing subsection (4) which laid down specifically that the provisions of section 80P will not apply to any cooperative bank and accordingly deduction u/s 80P was no more available to any regional rural banks from Assessment Year 2007-08.

2. That the ld CIT(A) has erred in deleting the addition of Rs. 8607600/- in view of the OM Dated 25.08.2006 addressed to RBI clarifying that regional Rural Banks would not be eligible for deduction u/s 80P of IT Act from Assessment Year 2007-08.

3. The ld CIT(A) erred in deleting the addition of Rs. 8607600/- in view of the circular NO. 6/2010 dated 20.09.2010 which clarified that circular BNO. 319 dated 11.01.1982 deeming any Regional Rural Bank to be cooperative Society stands withdrawn and RRBs are not eligible for deduction u/s 80P from the Assessment Year 2007-08.

3. Briefly stated the facts are that assessee is engaged in the business of banking. The assessee derives income from house property. The in the profit and loss account. The assessee is credited dividend income of Rs. 8 607600 from UP cooperative bank Ltd as well as Indian farmers and fertilisers cooperative Ltd., The assessee filed its return of income for Rs. 1 060 8800 on 29/10/2007. The return of income was further revised on 31/10/2008 to Rs. 2 Page 2 of 3 001200/–. The reason for revision was that the dividend income credited to the profit and loss account of Rs. 8 607600 was claimed as exempt and not chargeable to tax. The Ld. assessing officer picked up the case of the assessee for scrutiny and held that the claim of the assessee is not acceptable. In view of the reason that on the dividend income. No dividend distribution tax under section 1150 of the act has been paid. The Ld. assessing officer further noted that that in this year. The deduction under section 80 P is not available to the assessee and therefore on these dividend income such exemption is also not available. Consequently, assessment under section 143 (3 of the income tax act was passed on 18/11/2009 by the Ld. assessing officer determining the total income of the assessee at Rs. 1 079 8800/–.

4. The assessee aggrieved with the order of the Ld. assessing officer preferred appeal before the Ld. CIT (A), Meerut who per order dated 20/09/2013 allowed the claim of the assessee of exemption of dividend from cooperative societies holding that provisions of section 80 P (2) (d) covers the above exemption.

5. Revenue aggrieved with the order of the Ld. CIT (A) has preferred an appeal before us. The Ld. departmental representative submitted that it has been clarified wide circular dated 25/08/2006, wherein it has been stated that regional rural banks would not be eligible for deduction under section 80 P of the income tax act from assessment year 2007 – 08. He therefore submitted that for assessment year 2007 – 08, no exemption under section 80 P of the act is allowable to the regional rural banks holding them as cooperative banks.

SECTION 80P OF THE INCOME-TAX ACT, 1961 - DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES - CLARIFICATION REGARDING ELIGIBILITY OF DEDUCTION UNDER SECTION 80P TO REGIONAL RURAL BANKS CIRCULAR NO. 6/2010 [F.NO. 173(3)/44/2009-IT (A-I)], DATED 20-9-2010 Section 80P of the Income-tax Act, 1961 provides for a deduction from the income of cooperative societies referred to in that section.