The Income Tax Appellate Tribunal (ITAT) Hyderabad bench held insurance activities carried out by cooperative society did not fall with banking business. Therefore, the bench upheld the disallowance of deduction claimed by the assessee under Section 80P of the Income Tax Act, 1961.
Assesee, Indur Intideepam Producers MA Cooperative Societies Federation Limited is a Cooperative Society providing credit facilities to its members. Assesee filed return of income along with claiming deduction under section 80P of the Income Tax Act.
Thereafter AO issued notice under Section 142(1) of the Income Tax Act to assessee whereby the assessee was requested to file certain particulars. After considering the submission of the assessee AO noted that assessee was mainly in the business of lending services for guarantee payments.
Thus, the AO opined that the assessee was not eligible for deduction. Hence, he disallowed the deduction claimed by the assessee and added it to the returned income of the assessee
The assessee also owns certain equipment which it uses for undertaking specified dredging activities. The assessee is registered as a Tonnage Tax Company under the Tonnage Tax Scheme (TTS) as provided under Chapter XXIIHG of the Act.
As per the provisions of TTS, income derived from porting qualified ships would be treated as shipping income and would be taxable as per the computation mechanism provided therein.
After filing the return of income, the assessee’s case was selected for scrutiny under CASS and the statutory notices were duly served on the assessee.
Aggrieved by the order, the assesee filed appeal before the CIT(A), who dismissed the appeal of assessee. Then, the assessee filed a second appeal before the tribunal.
On behalf of the assessee, S. Ramarao , counsel argued that the Assessing Officer has disallowed the receipt instead of the income earned by the assessee on the said amount.
Shakeer Ahmed, Counsel for Revenue argued that the assessee has been earning income from the activities which do not fall within the purview of section 80P of the Act as the primary activities of the assessee are referring to the insurance services .
It was observed by the tribunal that the assessee can only claim the deduction in respect of the gross total income earned by the assessee from the activities mentioned in sub-section (2) of Section 80P of the Income Tax Act.
Therefore, the the activities of the insurance do not form a part and parcel of carrying on the business of banking and providing credit facilities to its members
After considering the facts submitted by the both parties, the two member bench of R.K. Panda, (Vice President) and Laliet Kumar, (Judicial Member) held that activities of the insurance do not fall within the realm of the banking activities as banking activities are separate and distinct from the insurance activities.
Therefore, it was concluded that the deduction claimed by the assessee in the return income with respect to insurance business should be disallowed.
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