ACIT VIRUDHUNAGAR CIRCLE, VIRUDHUNAGAR vs. PANDYAN GRAMA BANK, VIRUDHUNAGAR

The appeal preferred by the Revenue and the Cross Objection filed by the assessee are directed against different order of the ld. Commissioner of Income Tax (Appeals) 1, Madurai dated 05.10.2017 relevant to the assessment year 2014-15. The only effective ground raised in the appeal of the Revenue is that the ld. CIT(A) has erred in holding that the status of the assessee is “Cooperative Society” and directing the Assessing Officer to allow deduction under section 80P(2)(a)(i) of the Act. On the other hand, the assessee, by means of Cross Objection supported the order of the ld. CIT(A) on this issue.

Brief facts of the case are that the assessee has filed its return of income on 14.10.2014 admitting Nil income which was processed under section 143(1) of the Income Tax Act, 1961 [“Act” in short]. Subsequently, the case of the assessee was selected for scrutiny and notice under section 143(2) of the Act dated 31.08.2015 was issued and the same was duly served on the assessee on 14.09.2015. After making detailed discussion in the assessment order and distinguishing the RRB Act and Income Tax Act, the Assessing Officer has concluded the status of the assessee as a company and the deduction claimed by the assessee at ₹.130,72,52,390/- under section 80P(2)(a)(i) of the Act was disallowed and completed the assessment under section 143(3) of the Act.

The assessee carried the matter in appeal before the ld. CIT(A). By following the order of the Tribunal for the assessment years 2008-09 and 2010-11 in & 595/Mds/2014 vide order dated 25.08.2014, the ld. CIT(A) has directed the Assessing Officer to allow the deduction under section 80P(2)(a)(i) of the Act.

On being aggrieved, the Revenue is in appeals before the Tribunal. By supporting the orders of the Assessing Officer, the ld. DR submitted that the provisions of section 80P of the Act was amended by the Finance Act, 2006 w.e.f. 1st April, 2007 introducing sub-section (4), which laid down specifically that the provisions of section 80P of the Act will not apply to any co- operative bank other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank and therefore, the status of the assessee is a corporate entity and not eligible to claim deduction under section 80P(2)(a)(i) of the Act. On the other hand, by filing Cross Objection in support of the order of the ld. CIT(A), the ld. Counsel for the assessee submitted that the case of the assessee is squarely covered by the decision of the Coordinate Bench of the Tribunal from the assessment years 2007-08 onwards, which may be followed for the assessment year under consideration.

We have heard both sides, perused the materials on record and gone through orders of authorities below and also perused the copies of earlier orders of the Tribunal. It is an admitted fact that for the assessment year 2007-08, the Assessing Officer has allowed the claim of the assessee of deduction under section 80P(2)(a)(i) of the Act vide his order dated 19.03.2009. By order dated 28.10.2009, the ld. CIT passed order under section 263 of the Act quashing the assessment order on the ground that in view of introducing sub-section (4) to section 80P of the Act as per Finance Act, 2006 that the provisions of section 80P of the Act will not apply to any Co-operative Bank other than a Primary Agricultural Credit Society or a Primary Co-operative Agricultural and Rural Development Bank, the deduction allowed to the assessee under section 80P(2)(a)(i) of the Act should be withdrawn. Against the order of the ld. CIT, by considering the RRB Act and Income Tax Act, the Tribunal vide its order dated 13.08.2010 in on merits, gave a concurrent findings that the assessee has to be treated as a co-operative society and would be eligible to claim deduction under section 80P(2)(a)(i) of the Act and the relevant portion of the order is reproduced as under: “6. We have perused the orders and heard the rival contentions. It is not disputed that if the assessee is to be treated as a Co- operative society, then the deduction under section 80P(2) (a) (i) of the Act is available to it. The only dispute here is that assessee being a regional rural bank established under RRB Act, 1976, was to be treated as a co- operative bank or could be considered as a co-operative society No doubt, subsection (4) of section 80P introduced by Finance Act 2006 clearly takes a cooperative bank out of the purview of deduction available under 80P(2)(a)(i) of the Act Thus, if the assessee is a cooperative bank, it would not be eligible for such deduction Contention of the assessee is that in view of sections 22 arid 23 of the RRB Act, 1976, it was to be treated as a cooperative society and the said sections having not been overridden, it could only be treated as a co-operative society Further, relying on definition of Co-operative Bank” as given in the Banking Regulation Act, 1949, assessee submits that it is neither a State Co-operative Bank nor a Central Cooperative Bank nor a Primary Cooperative Bank, and therefore, not a co-operative bank at all. Whatever that may be, there is much strength in the argument of the assessee that it is to be treated as cooperative society in view of the provisions contained in RRB Act, 1976. If so, it would be eligible under section 80P(2)(a)(i) of the Act...........” 6.1 By following the above decision of the Tribunal dated 13.08.2010, in subsequent assessment years, the Tribunal has allowed the assessee to claim deduction under section 80P(2)(a)(i) of the Act. [I.T.A. Nos. 1088, 1091 & 1092/Mds/2012 for the assessment years 2007-08, 2008-09 & 2009-10 dated 23.08.2012; & 595/Mds/2014 for the assessment years 2008-09 and 2010-11 dated 25.08.2014; I.T.A. No. 1831/Mds/2015 for the assessment year 2011-12 dated 18.03.2016 and I.T.A. Nos. 2319 & 2320/Mds/2016 for the assessment years 2012-13 & 2013-14 dated 30.11.2016].

In the result, the appeal filed by the Revenue and the Cross Objection filed by the assessee are dismissed.