Section 80P Inserted to Encourage Growth of Co-Operative Societies: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT) has recently upheld the provisions of Section 80P of the Income Tax Act, affirming its role in promoting the growth of cooperative societies.

The ruling was made in the appeal concerning the assessment year 2015-16, where the Principal Commissioner of Income Tax (PCIT) had revised an earlier assessment order under Section 263.

The cooperative society, primarily involved in ginning and pressing raw cotton, had filed a return declaring nil income, which was accepted without adjustments during the initial assessment. However, upon reviewing the case, the PCIT deemed the original assessment erroneous and prejudicial to the interests of revenue, citing insufficient scrutiny by the Assessing Officer (AO).

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The PCIT noted that the society's operations, which included ginning and pressing for private entities and the use of automatic machinery, did not meet this criterion.

The society contested this revision, arguing that their activities were integral to the marketing of members' produce and that deductions under Section 80P were applicable. Furthermore, they asserted an alternative claim under Section 80P(2)(e) for income derived from letting godowns used in processing, focusing on the interconnectedness of these activities.

In its ruling, the ITAT acknowledged the legislative intent behind Section 80P, emphasising its purpose to foster the growth of cooperative societies. However, the tribunal affirmed the PCIT's decision, stating that the AO had not conducted a thorough inquiry into the crucial aspects of the case.

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It was observed that, “Therefore, looking into the bare language of the statutory provisions and in light of the activities carried out by the assessee, the PCIT held that the assessee did not specify the requirements of Section 80P(2)(a)(v) of the Act and hence the assessee is not eligible for claim of deduction under such section. 

Since the Assessing Officer, during the course of assessment processing did not inquire into the crucial aspect, the order passed by the AO was erroneous and prejudicial to the interest of the Revenue.  Further, the PCIT also observed that assessee vide submissions dated 12.12.2019 has contended that if it is held that the assessee is not eligible for deduction under Section 80P(2)(a)(v), in the alternative, deduction may be allowed under Section 80P(2)(e) of the Act”, the bench noted.”

However, in view of the alternative claim of the assessee, the PCIT was of the view that this contention of the assessee necessitate re-verification of the matter in its entirety by the A.O.

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However, on the contrary it was held against the assessee that, “Therefore, in light of these facts discussed above, the PCIT set-aside the assessment order is being erroneous and prejudicial to the interest of the Revenue.  On going through the contents of the assessment order, the assessee’s activities during the impugned year under consideration, and the assessee’s alternate claim for claim of deduction under Section 80P(2)(e) of the Act, we are of the considered view that there is no infirmity in the order of the Ld. PCIT, so as to call for any interference”.

The tribunal bench noted the necessity for re-verification of claims to ensure compliance with statutory provisions.

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