2017 (3) TMI 1475 - AT - Income Tax

Claim of deduction u/s 80P(2) denied - assessee is primarily engaged in the business of banking - 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, is entitled to deduction u/s 80P(2) despite being primarily engaged in banking activities and in view of section 80P(4) of the Act.

Analysis:

Issue 1: Denial of deduction u/s 80P(2)
The primary issue in this case revolved around the denial of deduction u/s 80P(2) to the assessee, a cooperative bank, by the Assessing Officer due to the bank's primary engagement in banking activities. The CIT(A) upheld the assessment order, leading the assessee to appeal to the Tribunal. The Tribunal initially denied the benefit of deduction u/s 80P to the assessee. However, the Hon'ble Kerala High Court, in a previous judgment, held that primary agricultural credit societies, including the assessee, registered under the Kerala Cooperative Societies Act, 1969, are entitled to the deduction u/s 80P(2). The High Court emphasized that the classification of being a primary agricultural credit society under the State law is crucial for determining eligibility for the deduction. The High Court's decision was based on the statutory provisions and the bye-laws of the societies, which clearly indicated the primary object of providing agricultural credit activities and loans for agricultural purposes. The High Court concluded that the authorities under the IT Act cannot question the classification of these societies under the State law, and hence, the appellants, including the assessee, were entitled to the exemption under section 80P of the IT Act.

Conclusion:
Given the High Court's judgment and the clear classification of the assessee as a primary agricultural credit society under the Kerala Cooperative Societies Act, the Tribunal held that the assessee is indeed entitled to the benefit of deduction u/s 80P(2) of the Act. The certificate issued by the Registrar of Cooperative Societies further supported the assessee's eligibility for the deduction. As no other issues were raised during the appeal, the Tribunal partially allowed the assessee's appeal, emphasizing the entitlement to the deduction under section 80P(2) based on the specific classification as a primary agricultural credit society under the State law.

This detailed analysis highlights the significant legal aspects and the reasoning behind the Tribunal's decision in favor of the assessee regarding the deduction u/s 80P(2) in alignment with the High Court's precedent.