2017 (4) TMI 297 - AT - Income Tax

Exemption u/s 80(P)(2) eligibility - assessee a Primary Agricultural Credit Co- operative Society registered under the Kerala Co-operative Society Act - Held that - Respectfully following the judgment in the case of Chirakkal Service Co-operative Bank Ltd ( 2016 (4) TMI 826 - KERALA HIGH COURT) CIT(A) is justified in directing the Assessing Officer to grant benefit of section 80P(2) of the Act wherein held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). - Decided in favour of assessee

Summary

Issues:
1. Interpretation of Section 80P(2) of the Income Tax Act.
2. Classification of the assessee as a Primary Agricultural Credit Society.
3. Applicability of exemption under Section 80P to the assessee.

Issue 1: Interpretation of Section 80P(2) of the Income Tax Act
The appeal and cross-objection involved a common issue regarding the interpretation of Section 80P(2) of the Income Tax Act. The revenue contended that the assessee, a cooperative society, was not entitled to exemption under Section 80P(2) as it was engaged in banking activities. The Assessing Officer had disallowed the deduction under Section 80P(2) for the relevant assessment year. However, the CIT(A) ruled in favor of the assessee, relying on a judgment of the Hon'ble jurisdictional High Court. The High Court had previously held that a primary agricultural credit society registered under the Kerala Cooperative Societies Act was entitled to the benefit of deduction under Section 80P(2).

Issue 2: Classification of the assessee as a Primary Agricultural Credit Society
The primary contention revolved around the classification of the assessee as a Primary Agricultural Credit Society. The Assessing Officer had denied the deduction under Section 80P(2) on the grounds that the assessee was engaged in banking activities and therefore did not qualify as a primary agricultural society. However, the CIT(A) disagreed and held in favor of the assessee, citing the judgment of the Hon'ble jurisdictional High Court. The High Court's decision emphasized that societies classified as primary agricultural credit societies under the Kerala Cooperative Societies Act were entitled to the exemption under Section 80P(2) of the Income Tax Act.

Issue 3: Applicability of exemption under Section 80P to the assessee
The crux of the matter was the applicability of the exemption under Section 80P to the assessee, a cooperative society registered under the Kerala Cooperative Societies Act. The Assessing Officer had initially denied the deduction under Section 80P(2) on the basis that the assessee was primarily engaged in banking activities, which, according to Section 80P(4), would disentitle them from claiming the deduction. However, the CIT(A) and subsequently, the Tribunal, relying on the judgment of the Hon'ble jurisdictional High Court, held that the assessee, being classified as a primary agricultural credit society, was indeed entitled to the benefit of the deduction under Section 80P(2).

This detailed analysis of the judgment highlights the key issues addressed, the arguments presented by the parties, and the ultimate decision rendered by the Tribunal based on the interpretation of relevant legal provisions and precedents.