ITO Vs Shakti Mahila Sangh Bahu (ITAT Jabalpur)
The case involved an appeal filed by the Income Tax Officer (Revenue) against the order of the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (CIT(A), NFAC), concerning Shakti Mahila Sangh Bahu (Assessee), a multi-purpose co-operative society. The core dispute was the eligibility of the Assessee’s income, specifically commission received from IDBI Bank for acting as a Business Correspondent (BC), for a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.
Factual Background and Dispute
The Assessee, registered under the Cooperative Societies Act, is engaged in providing micro-finance to its members. For the Assessment Year (A.Y.) 2017-18, the Assessee claimed a complete deduction of its total income, ₹1,34,10,566/-, under Section 80P. The original assessment was completed at the returned income. However, the Principal Commissioner of Income Tax (PCIT) later invoked Section 263 (Revision of erroneous and prejudicial orders), setting aside the assessment for de novo consideration.
The Assessing Officer (AO), in the fresh assessment under Section 143(3) read with Section 263, determined the Assessee’s total income at ₹1,72,53,990/-. This amount represented the commission received from IDBI for the BC services, which the AO treated as “Income from Other Sources” and consequently disallowed the Section 80P deduction against it. The AO’s view was that BC income was not business income eligible for the special deduction available to co-operative societies providing credit facilities to members.
