A cooperative credit society cannot be construed as ‘bank’ for purposes of deduction u/s 80P(4)

While hearing an appeal challenging allowance of exemption under Section 80P of the Income Tax Act 1961 to the Assessee, the Supreme Court of India observed that from a reading of the relevant Circulars issued by the Central Board of Direct Taxes (CBDT), the Assessee did not qualify as a Co-operative Bank/Bank and, therefore, Section 80(P)(4) shall not be applicable. 

In these circumstances, the Assessee would be entitled to benefit of exemption under Section 80(P)(2) of the Income Tax Act 1961, the Bench clarified.

A Division Bench of Justice MR Shah and Justice CT Ravikumar also observed that the findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) which being assailed by the Revenue, were factual in nature & which did not warrant invoking the Writ Jurisdiction of the Supreme Court as per Article 136 of the Constitution.

The Appellant-Revenue was represented by Mr. Balbir Singh, Additional Solicitor General, whereas the Respondent-Assessee was represented by Mr. Sachin Patil, Advocate.

The Appellant-Revenue filed the present appeal to contest findings of the Income Tax Appellate Tribunal (ITAT), in holding that the assessee, a cooperative credit society is not a bank for purposes of Section 80P(4) of the Income Tax Act. Such findings of the ITAT were later affirmed by the High Court of Maharashtra.

On hearing the contentions of both the parties, the Supreme Court also observed that the issues raised by the Revenue were already settled, in favor of the Assessee, vide the judgment of the Larger Bench of the Supreme Court in Mavilayi Service Cooperative Bank Limited and Others Vs. Commissioner of Income Tax, Calicut and Another.

With these observations, the Supreme Court dismissed the Revenue’s appeal and sustained the findings recorded by the ITAT to the effect that the Assessee would be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act.

Cause title: The Principal Commissioner of Income Tax – 17 Mumbai vs M/s Annasaheb Patil Mathadi Kamgar Sahkari Pathpedi Ltd. [CIVIL APPEAL No. 8719/2022 / 2023-Enterslice-5-SC-IT]

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