2016 (10) TMI 1261 - AT - Income Tax

Disallowance of benefit of deduction u/s. 80P(2) - assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act 1969 - HELD THAT - Admittedly the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act 1969. The certificate issued by the Registrar of Cooperative Societies to the above said effect is placed on record. The Hon ble High Court of Kerala in the case of Chirakkla Service Coop Bank Ltd. 2016 (4) TMI 826 - KERALA HIGH COURT had held that a primary agricultural credit society registered under the Kerala Cooperative Societies Act 1969 is entitled to the benefit of deduction u/s. 80P(2). - decided in favour of assessee.

Summary

Issues:
1. Disallowance of deduction u/s. 80P(2) of the Income Tax Act.

Analysis:
The appeal was filed against the order of the CIT(A) confirming the disallowance of the benefit of deduction u/s. 80P(2) of the Act. The Assessing Officer had denied the deduction, stating that the assessee, a primary agricultural credit society, was primarily engaged in banking activities and thus ineligible for the deduction. The first appellate authority upheld this decision, leading to the current appeal.

The counsel for the assessee argued that the denial of the deduction was not justified, citing a judgment by the Hon'ble High Court of Kerala in a similar case. The High Court had ruled that primary agricultural credit societies registered under the Kerala Cooperative Societies Act were entitled to the deduction u/s. 80P(2) of the Act. The Tribunal considered this precedent and the facts of the case, noting that the assessee was indeed registered under the Kerala Cooperative Societies Act as a primary agricultural credit society.

The Tribunal referred to the High Court's findings, emphasizing that the purpose and classification of the society under the State law were crucial in determining eligibility for the deduction. The High Court's judgment highlighted that societies classified as primary agricultural credit societies were entitled to the exemption under section 80P of the IT Act. Based on this legal precedent and the specific classification of the assessee as a primary agricultural credit society, the Tribunal allowed the appeal partially, granting the benefit of deduction u/s. 80P(2) of the Act.

Therefore, the Tribunal's decision was based on the interpretation of relevant legal provisions, the classification of the assessee as a primary agricultural credit society, and the precedent set by the Hon'ble High Court of Kerala in a similar case. The appeal was partly allowed, affirming the assessee's entitlement to the deduction under section 80P(2) of the Income Tax Act.