2024 (5) TMI 97 - AT - Income Tax

Deduction u/s 80P(1) - assessee is registered as a Primary Agricultural Credit Society (PACS) - HELD THAT - Banking being an eligible activity u/s. 80P(2)(a)(i) the assessee being in the said business would again matter little; rather entitle it for the deduction on the entirety of it s profit i.e. including that referable to business with non-members. Further still the assessee/s satisfying the primary condition of s. 2(19) of the Act defining a society is thus a cooperative society a pre-requisite for deduction u/s. 80P(1). The resolution of the dispute as to whether the assessee is therefore eligible for deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) and where so its extent thus rests solely on the assessee being or not being a co-operative bank a term again defined under BRA which stands adopted for the purpose of s. 80P determining the issue. Copy of the bye-laws only a certified translated copy of which in full can be taken cognizance of and regarded as a part of the record is not on record. As also noted by the Tribunal in it s orders afore-referred what value the restriction on the area for it s members if the assessee-society is otherwise eligible to accept deposits from non-members as well Under the circumstances we for the reasons afore-noted as also the cases referred to set aside the orders by the Revenue authorities and restore the matter back to the file of the Assessing Officer (AO) to determine the assessee s eligibility for deduction u/s. 80P(1) r/w s. 80P(2)(a)(i) on the basis of it being or as the case may be not being a co-operative bank i.e. on the basis of it s bye-laws read with the Kerala Act and the BRA as well as the quantum of the deduction there-under which we clarify would be in full where the assessee is a cooperative bank with it s entire income arising from the business of banking. Assessee s appeal is allowed for statistical purposes.

Summary

Issues:
The denial of deduction u/s 80P(1) of the Income Tax Act, 1961 to the Assessee on its profits and gains of business in assessments u/s 143(3) for the Assessment Years (AYs).

Issue 1: Interpretation of Co-operative Society Status

The Assessee claimed deduction u/s 80P(1) which was denied. The Counsel referred to Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC) but couldn't provide the bye-laws. The Assessee is a Primary Agricultural Credit Society (PACS) under the Kerala Co-operative Societies Act, 1969. The restriction on membership area is relevant due to an amendment in 1999. The Tribunal discussed previous cases and clarified that even if registered as a PACS, if the society accepts deposits and lends to non-members, it may be considered a co-operative bank under the Banking Regulation Act, 1949 (BRA). The Tribunal emphasized that being a cooperative society is a prerequisite for deduction u/s 80P(1).

Issue 2: Bye-laws and Eligibility for Deduction

The Tribunal noted that the certified translated copy of the bye-laws was not available. The Tribunal set aside the Revenue authorities' orders and returned the matter to the Assessing Officer (AO) to determine the Assessee's eligibility for deduction u/s 80P(1) based on whether it qualifies as a co-operative bank as per its bye-laws, the Kerala Act, and the BRA. The quantum of deduction would be full if the Assessee is a cooperative bank with all income from banking business.

Outcome:
The Tribunal allowed the Assessee's appeal for statistical purposes, setting aside the previous orders and instructing the AO to reevaluate the Assessee's eligibility for deduction u/s 80P(1) based on its status as a co-operative bank and the nature of its business.