Credit Society wherein Finance Business is Confined only to its members is Eligible for benefit u/s 80P: ITAT Ahmedabad [Read Order]

The ITAT, Ahmedabad bench in a recent decision, ruled that a credit society engaged in the business of financing its own members are entitled to claim benefit of section 80P(2)(a)(i) of the Income Tax Act.

In the instant case, the assessee is a credit co-operative society engaged in the business of providing credit facility to its members. The assessee had claimed deduction u/s 80P (2)(a)(i) of the Act. However, the Assessing Officer rejected the claim by observing that the benefit of the said provision cannot be granted to the assessee since they are engaged in providing credit facilities to its members and doing banking business and provisions of section 80P(4) of the Income Tax Act inserted by Finance Act, 2006 from Asst. Year 2007-08 applies to the assessee. On first appeal, the CIT(A) relied upon the decision in M/s Jafari Momin Vikas Credit Co-op. Society Ltd , and deleted the addition.

On second appeal preferred by the Revenue, the division bench noted that the assessee credit co-op. society is not carrying on the activity in the nature of banking business and is also not registered under the Banking Regulation Act and is only confined for accepting and providing finance to its members.

Further, under the provisions of the Banking Regulations Act, the term “banking” is defined as “Banking means the accepting, for the purpose of lending or investment, of deposits of money from the public repayable on demand or other wise and withdrawal by cheque draft order or otherwise.”

“From going through this definition it is clear that under the banking business lending and accepting deposit is from public at large which is not so in the case of assessee society wherein finance business is confined only to its members. We are, therefore, of the view in the given facts and circumstances of the case and the finding given by ld. CIT(A) relying on the decision of the Co-ordinate Bench in the case of M/s Jafari Momin Vikas Credit Co-op. Society Ltd.(supra), we find that provisions of section 80P(4) of the Act are not applicable to the assessee and is, therefore, eligible to claim deduction u/s 80P(2)(a)(i) of the Act. We find no reason to interfere with the order of ld. CIT(A). We uphold the same.”

Read the full text of the order below.