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2024 (6) TMI 1360 - AT - Income TaxIssues Involved: 1. Disallowance of deduction under Section 80P(2)(a)(i) for banking business. 2. Disallowance of deduction under Section 80P(2)(a)(iii) for paddy procurement business. 3. Disallowance of deduction under Section 80P(2)(a)(iv) for trading business (sale of seeds, manure, fertilizers, and pesticides). 4. Disallowance of deduction under Section 80P(2)(d) for dividend income. 5. Total disallowance of deductions claimed under Section 80P. Detailed Analysis: 1. Disallowance of Deduction under Section 80P(2)(a)(i) for Banking Business: The assessee society claimed a deduction under Section 80P(2)(a)(i) for income earned from banking and providing credit facilities to its members, amounting to Rs. 7,00,937. The Assessing Officer (A.O.) disallowed this deduction, classifying the society as a co-operative bank and thus not eligible under Section 80P(4). The appellate tribunal disagreed, noting that the society was a primary agricultural co-operative society, not a co-operative bank, and thus not subject to the restrictions of Section 80P(4). The tribunal cited the necessity of a Reserve Bank of India license for a society to operate as a co-operative bank, which the assessee did not have. Therefore, the tribunal directed the A.O. to allow the deduction. 2. Disallowance of Deduction under Section 80P(2)(a)(iii) for Paddy Procurement Business: The assessee claimed a deduction for income from paddy procurement business under Section 80P(2)(a)(iii), amounting to Rs. 4,49,911. The A.O. disallowed this, stating that the society acted as an agent for the Chhattisgarh Marketing Federation and was not directly engaged in marketing agricultural produce grown by its members. The tribunal noted that the issue was similar to a previous case (Gramin Sewa Sahakari Samiti Maryadit & Ors Vs. ITO), where the matter was remanded to the A.O. for verification. The tribunal directed the A.O. to verify whether the paddy procurement was exclusively from members and to allow the deduction accordingly. 3. Disallowance of Deduction under Section 80P(2)(a)(iv) for Trading Business: The assessee claimed a deduction for income from trading activities (sale of seeds, manure, fertilizers, and pesticides) under Section 80P(2)(a)(iv), amounting to Rs. 1,92,820. However, the tribunal found that this issue did not emanate from the orders of the A.O. or the CIT(Appeals). Consequently, the tribunal refrained from addressing this issue, dismissing the corresponding ground of appeal. 4. Disallowance of Deduction under Section 80P(2)(d) for Dividend Income: The assessee claimed a deduction for dividend income received from investments in other co-operative societies under Section 80P(2)(d), amounting to Rs. 59,760. The A.O. disallowed this, arguing that the income was not from a co-operative society. The tribunal, referencing a previous decision (Gramin Sewa Sahakari Samiti Maryadit & Ors Vs. ITO), held that dividend income from a co-operative bank qualifies for deduction under Section 80P(2)(d). The tribunal directed the A.O. to allow the deduction. 5. Total Disallowance of Deductions Claimed under Section 80P: The total disallowance of Rs. 14,03,428 claimed under Section 80P was contested. The tribunal's decisions on the specific issues led to the partial allowance of the total claimed deductions. The tribunal set aside the CIT(Appeal)'s order and allowed the appeal for statistical purposes, directing the A.O. to re-evaluate the claims based on the tribunal's observations. Conclusion: The tribunal allowed the appeal partially, directing the A.O. to allow deductions for banking business and dividend income, and to re-evaluate the paddy procurement business deduction. The issue of trading business deduction was dismissed due to lack of origination from lower authorities' orders. The total disallowance was adjusted accordingly.
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