2020 (7) TMI 279 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule - HELD THAT - The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In this case, such a detailed examination has not been conducted by the A.O s. In the light of the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2).

Summary

Issues:
- Delay in filing the appeal before the Tribunal
- Justification of confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act

Delay in filing the appeal before the Tribunal:
The appeal was filed with a delay of 1 day, and the assessee submitted a petition for condonation of delay. The Tribunal, after perusing the reasons in the delay condonation petition, found that the delay was not due to any fault of the assessee. Consequently, the delay was condoned, and the appeal was considered on its merits.

Justification of confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act:
The issue revolved around whether the CIT(A) was correct in upholding the Assessing Officer's decision to disallow the deduction claimed under section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer had disallowed the deduction on the grounds that the assessee, a cooperative society, was primarily engaged in banking activities rather than agricultural credit activities. The CIT(A) supported this decision based on the assessment that the agricultural credit provided by the assessee was minimal, thus not meeting the criteria of a primary agricultural credit society.

The Tribunal reviewed the legal precedents set by the Kerala High Court in similar cases. It was noted that the Assessing Officer must conduct an inquiry into the activities of the assessee society to determine eligibility for the deduction under section 80P of the Income Tax Act. The Tribunal emphasized that each assessment year is separate, and eligibility for the deduction should be verified annually. The Tribunal referred to specific judgments and highlighted that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Co-operative Societies when determining eligibility for the deduction.

In this case, the Tribunal found that the Assessing Officer did not conduct a detailed examination of each loan disbursement to determine whether they were for agricultural purposes. The Tribunal concluded that a fresh examination was necessary to ascertain the nature and purpose of each loan disbursement. Therefore, the issue was remanded back to the Assessing Officer for a thorough review in line with the legal principles established by the Kerala High Court.

The Tribunal directed the Assessing Officer to reexamine the activities of the assessee society and make a decision based on a detailed analysis of the loan disbursements. The assessee was instructed to cooperate and provide necessary details. The Tribunal dismissed the stay application as the appeal had been disposed of. Ultimately, the appeal was allowed for statistical purposes, and the stay application was dismissed.

The judgment highlighted the importance of a comprehensive assessment by the Assessing Officer to determine the eligibility of deductions under the Income Tax Act, emphasizing the need for a detailed examination of the activities and transactions of the assessee society.