2018 (2) TMI 1281 - AT - Income Tax

Entitlement for exemption u/s. 80(P)(2) - assessee being a Primary Agricultural Credit Co-operative Society registered under the Kerala Co-operative Society Act - Held that - Hon ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd vs. CIT 2016 (4) TMI 826 - KERALA HIGH COURT has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). The assessee is admittedly only providing credit facilities to its members during the relevant AY s. The assessee is primary agricultural credit society and has produced a certificate of Registrar of Co-operative Societies under Kerala Co-operative Societies Act, 1969 to the above effect. Since the Hon ble Kerala High Court has categorically held that a Primary Agricultural Credit Society registered under the Kerala Co-operative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2) of the Act, CIT(A) is justified in directing the Assessing Officer to grant the benefit of deduction u/s. 80P(2) - Decided in favour of assessee.

Summary

Issues:
1. Entitlement to exemption under section 80P(2) of the Income-tax Act for a primary agricultural credit society.
2. Interpretation of the law regarding deduction under section 80P for a cooperative society primarily engaged in banking activities.

Analysis:

Issue 1: Entitlement to exemption under section 80P(2)
The case involved an appeal by the Department against the Commissioner of Income-tax (Appeals)'s order regarding the entitlement of a primary agricultural credit society to exemption under section 80P(2) of the Income-tax Act for the assessment year 2013-2014. The Department contended that the society was primarily a cooperative bank and not solely a primary agricultural credit society, thus challenging the allowance of deduction under section 80P(2). The Department raised substantial questions of law and argued that the CIT(A) should have waited for a decision from the Hon'ble Supreme Court on a similar matter. However, the Tribunal, after considering the facts and legal precedents, dismissed the appeal by the Revenue, upholding the entitlement of the primary agricultural credit society to the benefit of deduction under section 80P(2) based on the Kerala High Court's judgment in a similar case.

Issue 2: Interpretation of the law regarding deduction for cooperative society
The central issue revolved around the interpretation of the law concerning the eligibility of a cooperative society, engaged primarily in banking activities, for deduction under section 80P of the Income-tax Act. The Assessing Officer had disallowed the deduction under section 80P(2) for the society, citing the insertion of section 80P(4) effective from 01.04.2007. However, the CIT(A) relied on the judgment of the Hon'ble jurisdictional High Court, which held that a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction under section 80P(2). The Tribunal concurred with the CIT(A)'s decision, emphasizing that the society's classification as a primary agricultural credit society under the State law was crucial in determining its eligibility for the deduction. The Tribunal dismissed the Revenue's appeal, affirming the society's entitlement to the deduction under section 80P(2) based on the legal interpretation provided by the Kerala High Court.

In conclusion, the judgment by the Appellate Tribunal ITAT Cochin upheld the entitlement of a primary agricultural credit society to exemption under section 80P(2) of the Income-tax Act and clarified the interpretation of the law regarding the eligibility of cooperative societies primarily engaged in banking activities for deduction under section 80P.