Orissa High Court Allows Deduction To The Co-operative Society Involved In The Business Of Banking

The Orissa High Court has granted the deduction to the Co-operative Society engaged in the banking business.

The division bench of Chief Justice Dr. S. Muralidhar and Justice M. S. Raman has observed that the tribunal was justified in making further classification while interpreting Section 80P(4) of the Income Tax Act by treating it to be different from the primary agriculture rural development bank/co-operative societies.

The ITAT upheld the CIT appeal's decision, which barred deductions and allowed a 7.5% interest rate on bad and doubtful debts and accounts. While interpreting Section 80P (4), the ITAT was further classified as distinct from primary agriculture and rural development banks/cooperative societies.

The ITAT has noted that the assessee bank was entitled to an additional 10% deduction along with the 7.5% calculated by the Assessing Officer (AO) under Section 36(1)(vii)(viii) of the Income Tax Act, 1961. The ITAT remanded the case to the AO in the order for the AYs, and the AO was also directed to grant deduction in accordance with Section 36(1)(vii-a).

On remand, the AO passed a fresh order on August 31, 2017, allowing the deduction as claimed in full. A similar order has already been passed in relation to AYs 2013–14 and 2014–15.

The court relied on the decision of the Supreme Court in the case Mavilayi Service Cooperative Bank Ltd. v. Commissioner of Income Tax, Calicult in which it was held that cooperative societies registered as primary agricultural credit societies are entitled to deductions under section 80P(2)(a)(i) of the Income Tax Act, even when they may also be giving loans to their members that are not related to agriculture.

The court ruled that after the appeal effect is given on the basis of the order, the assessee may apply for a refund in accordance with the law.

Case Title: Cuttack Central Co-operative Bank Ltd. Versus Asst. Commissioner of Income Tax

Case No: ITA No.113 of 2012

Citation: 2023 LiveLaw (Ori) 16

Date: 09.01.2023

Counsel For Appellant: Senior Advocates Jagabandhu Sahu, S.Ku. Sarangi

Counsel For Respondent: Senior Standing Counsel T.K. Satapathy

Click Here To Read The Order