2018 (10) TMI 1445 - AT - Income Tax

Entitlement to deduction u/s. 80P(2)(a)(i) - assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 - denial of claim as assessee was primarily engaged in the business of banking - Held that - Admittedly, the assessee is primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The Hon ble High Court of Kerala in the case of Chirakkal Service Co-op 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). Thus we hold that the assessee-society is entitled to the benefit of deduction u/s. 80P - decided against revenue

Summary

Issues:
- Entitlement to deduction u/s. 80P(2)(a)(i) of the I. T. Act.

Analysis:
The judgment by the Appellate Tribunal ITAT COCHIN involved a dispute regarding the entitlement to deduction under section 80P(2)(a)(i) of the Income Tax Act. The appellant, a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, had filed for deduction u/s. 80P for the assessment year 2015-2016. The Assessing Officer denied the deduction, citing that the appellant was primarily engaged in banking activities, thus ineligible for the deduction according to section 80P(4) inserted from 01.04.2007. The CIT(A) overturned this decision, relying on the judgment of the Jurisdictional High Court in a similar case. The High Court had held that societies classified as primary agricultural credit societies under the Kerala Cooperative Societies Act were entitled to the deduction u/s. 80P(2). The Tribunal concurred with this interpretation, emphasizing that the bye-laws and classification of the societies under the State law were crucial in determining eligibility for the exemption.

In its detailed analysis, the Tribunal referenced the High Court's findings, which highlighted the legislative recognition of societies classified as primary agricultural credit societies under State laws. The High Court emphasized that the purpose and objects of such societies, as approved by the competent authority under the State law, must be considered in determining eligibility for the deduction. The Tribunal reiterated that the bye-laws of the societies and their classification as primary agricultural credit societies were pivotal in establishing their entitlement to the exemption under section 80P. The Tribunal's decision was in alignment with the High Court's interpretation, affirming that the appellant-society met the criteria for deduction u/s. 80P of the Income Tax Act.

Ultimately, the Tribunal dismissed the appeal by the Revenue, upholding the entitlement of the primary agricultural credit society to the benefit of deduction u/s. 80P of the Act. The judgment, delivered on October 26, 2018, reinforced the importance of the specific classification of societies under State laws and their operational objectives in determining eligibility for tax deductions under relevant provisions of the Income Tax Act.