2017 (3) TMI 1039 - AT - Income Tax

Benefit of deduction u/s 80P(2) - Held that - In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon ble High Court, in assessee s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, we hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act.

Summary

Issues Involved:
Denial of deduction u/s 80P(2) - Whether assessee, a cooperative bank, primarily engaged in banking, is entitled to deduction u/s 80P(2) of the Act.

Analysis:
The case involved the denial of deduction u/s 80P(2) to the assessee, a cooperative bank registered under the Kerala Cooperative Societies Act, 1969. The Assessing Officer rejected the deduction claim stating that the assessee, primarily engaged in banking, is not entitled to the deduction u/s 80P(2) due to section 80P(4) of the Act. The CIT(A) upheld the assessment order, leading the assessee to appeal to the Tribunal. The Tribunal initially dismissed the appeal, but the Hon’ble Kerala High Court, in a related case, held that the Tribunal erred in denying the exemption u/s 80P. The High Court emphasized that societies classified as primary agricultural credit societies under the State law are entitled to the exemption. The High Court's judgment prompted a rehearing of the case on 13th March 2017.

In the subsequent hearing, the Tribunal considered the High Court's ruling and the definition of primary agricultural credit societies under the Kerala Cooperative Societies Act, 1969. The Tribunal noted that the Registrar of Cooperative Societies had issued a certificate confirming the assessee's status as a primary agricultural credit society. Citing the High Court's decision in similar cases, the Tribunal concluded that the assessee, being a primary agricultural credit society, is indeed entitled to the deduction u/s 80P(2) of the Act. As no other issues were raised during the appeal, the Tribunal partially allowed the assessee's appeal, granting the benefit of deduction u/s 80P(2) in line with the High Court's interpretation.

Overall, the judgment clarified that cooperative banks classified as primary agricultural credit societies under the State law are eligible for the deduction u/s 80P(2) of the Income Tax Act. The Tribunal's decision aligned with the High Court's interpretation, emphasizing the importance of the society's classification and objectives under the relevant State law for determining entitlement to the exemption.