2017 (3) TMI 1822 - AT - Income Tax

Deduction u/s 80P - assessee was in the business of banking and section 80P(4) stood attracted and disallowed the claim of the assessee u/s. 80P(2)(a)(i) - CIT(A), by relying on the judgment of Hon ble Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. v. CIT 2016 (4) TMI 826 - KERALA HIGH COURT accepted the claim of the assessee u/s. 80P(2)(a)(i) - HELD THAT - Assessee having produced the certificate which clearly indicated its nature as a primary agricultural credit society, in our opinion, section 80P(4) could not have been invoked for denying the claim u/s. 80P(2)(a)(i) - We cannot find fault with the order of the CIT(A). As for the judgment of Hon ble Jurisdictional High Court in the case of Perithalmanna Service Co-operative Bank vs. CIT 2014 (6) TMI 184 - KERALA HIGH COURT relied on by Ld. DR, this was pronounced on 31st January, 2014 prior to the judgment of Hon ble Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. v. CIT 2016 (4) TMI 826 - KERALA HIGH COURT Further the said case dealt with the revisionary powers of the CIT u/s. 263 of the Act when the Assessing Officer had failed to make necessary enquiries.

Summary

Issues:
Appeal by Revenue against CIT(A) order granting deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 based on the classification of the assessee as a Primary Agricultural Credit Society under the Kerala Co-operative Societies Act, 1969.

Analysis:
The Revenue contended that the assessee did not pursue its principal object of providing agricultural credits to its members, losing the characteristics of a Primary Agricultural Credit Society. The Revenue argued that a factual inquiry was necessary to determine the nature of the assessee's business. The CIT(A) relied on the judgment in a similar case to support the assessee's claim.

The CIT(A) upheld the assessee's claim based on the classification as a Primary Agricultural Credit Society under the Kerala Co-operative Societies Act, 1969. The judgment cited emphasized that such classification determined the society's principal object of providing agricultural credit activities and loans for agricultural purposes, limiting its area of operation. The CIT(A) correctly applied this legal principle to grant the deduction.

The ITAT noted that the assessee had produced a certificate classifying it as a primary agricultural credit society, making the invocation of section 80P(4) to deny the deduction inappropriate. The ITAT supported the CIT(A)'s decision and distinguished a previous judgment cited by the Revenue, emphasizing the timing and context of the cases. The ITAT found no reason to interfere with the CIT(A)'s order.

The Cross Objections filed by the assessee were deemed unnecessary as they aligned with the CIT(A)'s decision. Consequently, both the Revenue's appeals and the assessee's Cross Objections were dismissed by the ITAT, upholding the CIT(A)'s order granting the deduction u/s. 80P(2)(a)(i) to the assessee.

In conclusion, the ITAT upheld the CIT(A)'s decision based on the classification of the assessee as a Primary Agricultural Credit Society, emphasizing the significance of such classification in determining the eligibility for the deduction under the Income Tax Act.