The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT), granted relief to Karnataka Vikas Grameena Bank and allowed deduction on income from cooperative society.
The assessee is Karnataka Vikas Grameen Bank and the Counsel for the assessee also argued on the legal issue in regard to eligibility of claiming deduction under Section 80P of the Income Tax Act by holding that the assessee is not cooperative bank and it is a cooperative society, therefore, the Section 80P(iv) will not affect the eligibility for claiming deduction under Section80P(2a)(i) of the Income Tax Act on the profits earned.
During the year, he further submitted that the Central Government in exercise of his powers conferred by sec.23A(i) of the Rural Bank Act 1976 merged four Regional Rural Banks in single rural bank, which is a assessee bank and referred to the various definitions as per respective Act and Banking Regulations Act.
The Counsel further submitted that the assessee is eligible for claiming deduction under Section 80P(2a)(i) within the frame work of Circular No.14/1959 of the Act to which the lower authorities have not granted.
The Counsel for the Revenue relied on the order CIT(A)/ AO in regard to Section 36(1)(vii)/36(1)(viia) of the Income Tax Act has been decided by the Jurisdictional High Court of Karnataka in the case of CIT vs. Syndicate Bank that the issue is decided in favour of the revenue, therefore, reopening made by the lower authorities have been justified and addition should be upheld.
A Coram comprising George George K, Judicial Member and Laxmi Prasad Sahu, Accountant Member observed that “The assessee is a regional rural bank and formed with the merging of four regional banks into a single regional rural bank. As per the Regional Rural Bank Act 1976 notification dated 12/09/2005, the shareholders were Central Government, State Government and sponsored Bank.”
“We hold that the assessee is a cooperative society for the purpose of Income-tax Act and assessee is eligible for claiming deduction as per Section 80P(2)(a)(i) of the Income Tax Act. The provisions of Section 80P(4) will not apply in the case of the assessee” the Tribunal ruled.
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