2017 (6) TMI 329 - AT - Income Tax

Claim of deduction u/s 80P(2) - denial of claim as assessee is primarily engaged in the business of banking and in view of section 80P(4) of the Act, the assessee is not entitled to deduction - Held that - In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate has been issued by the Registrar of Cooperative Societies to the above said effect and the same is on record. The Hon ble High Court, in assessee s own case and other batch of cases, had held that primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969, is entitled to the benefit of deduction u/s 80P(2). Since there is a certificate issued by the Registrar of Cooperative Societies, stating that the assessee is a primary agricultural credit society, thus hold that the assessee is entitled to the benefit of deduction u/s 80P(2) of the Act. - Decided in favour of assessee.

Summary

Issues:
Denial of deduction u/s 80P(2) to a cooperative bank categorized as a primary agricultural credit society under the Kerala Cooperative Societies Act, 1969.

Analysis:
The Assessing Officer rejected the claim of deduction u/s 80P(2) for the cooperative bank, stating that it is primarily engaged in banking activities and hence not eligible for the deduction under section 80P(4) of the Act. The CIT(A) upheld this decision. Subsequently, the Tribunal also ruled against the assessee, denying the benefit of deduction u/s 80P of the Act. However, the Hon'ble Kerala High Court, in a similar case involving a cooperative bank, held that the Tribunal erred in denying the exemption u/s 80P. The High Court emphasized that societies classified as primary agricultural credit societies under the Kerala Cooperative Societies Act, 1969, are entitled to the exemption under section 80P. The High Court further clarified that the authorities under the Income Tax Act cannot question the classification and objects of societies registered under the State Law.

In the present case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969, as confirmed by the Registrar of Cooperative Societies. Given the High Court's precedent and the certification from the Registrar, the Tribunal concluded that the assessee is indeed entitled to the deduction u/s 80P(2) of the Act. The Tribunal's decision was based on the specific classification of the assessee as a primary agricultural credit society under the State Law, which aligns with the statutory provisions granting exemption under section 80P.

The Tribunal's judgment highlights the importance of the classification of cooperative societies under State Laws, particularly when determining eligibility for tax exemptions under the Income Tax Act. The case underscores the significance of adherence to legal definitions and classifications established by competent authorities under relevant State legislation. The Tribunal's decision in favor of the assessee emphasizes the need for consistency in interpreting and applying tax laws concerning cooperative societies engaged in agricultural credit activities.

In conclusion, the Tribunal allowed the appeal filed by the assessee, partially overturning the previous decisions that denied the deduction u/s 80P(2). The judgment reaffirms the entitlement of primary agricultural credit societies, registered under the Kerala Cooperative Societies Act, to the benefit of deduction under section 80P of the Income Tax Act.