2020 (8) TMI 270 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - as per AO assessee was essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT - AO after perusing the narration of the loan extracts for the financial period 2016-2017, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. 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. A.O. has not examined to what extent loans, if any, has been disbursed to non-members. There is a passing statement in the assessment order that there have been disbursement of loans to non-members as well. There should be fresh examination by the AO 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 to non-members of assessee-society, for nonagricultural purposes etc. 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) - The issue raised in this appeal is restored to the files of the Assessing Officer. - Decided in favour of assessee for statistical purposes

Summary

Issues Involved:
- Whether the CIT(A) was justified in confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act for the assessment year 2017-2018.

Detailed Analysis:
1. Background: The assessee, a co-operative society registered under the Kerala Co-operative Societies Act, 1969, filed a return for the assessment year 2017-2018 claiming deduction u/s 80P of the I.T.Act. The Assessing Officer disallowed the claim based on the business nature of the society, primarily banking activities, and the introduction of section 80P(4) of the I.T.Act from 01.04.2007.

2. Appeals Process: The assessee appealed to the CIT(A), who upheld the disallowance citing the society's minimal agricultural credit activities, as per the judgment of the Full Bench of the Hon'ble jurisdictional High Court. The CIT(A) rejected the appeal for the assessment year 2017-2018.

3. Tribunal's Decision: The Tribunal considered the conflicting judgments of the Hon'ble Kerala High Court in the cases of Chirakkal Service Co-operative Bank Ltd. and The Mavilayi Service Co-operative Bank Ltd. The Tribunal emphasized that each assessment year requires a fresh examination by the Assessing Officer to determine the eligibility of deduction u/s 80P of the I.T.Act. The Assessing Officer was directed to conduct a detailed inquiry into the nature and purpose of each loan disbursement, especially regarding agricultural loans and loans to non-members.

4. Conclusion: The Tribunal restored the issue to the Assessing Officer for a thorough examination in line with the Full Bench judgment. The assessee was instructed to cooperate and provide necessary details. The Tribunal allowed the appeal for statistical purposes and dismissed the stay application as infructuous.

By following the Full Bench judgment, the Tribunal emphasized the need for a detailed assessment by the Assessing Officer to determine the eligibility of deduction u/s 80P of the I.T.Act for each assessment year, especially focusing on the nature and purpose of loan disbursements.