While dismissing a departmental appeal, a division bench of the Allahabad High Court recently observed that deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 can be allowed to Co-operative banks which are carrying on banking business.
In the instant case, the Assessing Officer, in view of debt recovery tribunal Order for financial embezzlement, doubted the eligibility of the assesse to claim for exemption under Section 80P(2)(a)(i). He accordingly, determined the assessees tax liability by considering it as an Association of Persons (AOP).
However, on second appeal, the Tribunal quashed the order and directed the AO to allow exemption u/s 80P(2)(a)(i) of Income Tax Act, 1961 treating the assessee as a cooperative society carrying on business of banking.
The department approached the High Court against the order of the Tribunal.
A bench of Justices Pankaj Mithal and Umesh Chandra Tripathi noticed the decision in Commissioner of Income Tax, Ghaziabad v. M/s. Ghaziabad Urban Co-Operative Bank Ltd, and ruled that Co-operative banks which are carrying on banking business are entitled for deduction under Section 80P(2)(a)(i) of the IT Act, 1961.
Read the full text of the Order below.
