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2018 (1) TMI 784 - AT - Income TaxEntitlement for deduction u/s 80P - whether the respondent assessee before us is whether primary agricultural society or a primary co-operative agricultural rural development bank? - Held that - Undisputedly, it is a co-operative bank. But it is not a primary agricultural credit society. The area of operation of the respondent assessee is not confined to a Taluk and therefore it is not a primary cooperative agricultural and rural development bank. Therefore, provisions of sub-section (4) of section 80P are squarely applicable and the ratio of the decision of the Hon ble Kerala High Court in the case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. (2016 (5) TMI 1164 - KERALA HIGH COURT ) is squarely applicable. We hold that the respondent-assessee was not entitled for deduction u/s 80P - Decided against assessee.
Issues Involved:
1. Whether the order of the Commissioner of Income Tax (Appeals)-5, Bangalore, is opposed to the law and facts of the case. 2. Whether the CIT(A) was correct in allowing the claim made by the assessee under section 80P(2)(a)(i) of the Income Tax Act, 1961. 3. Whether the respondent-assessee qualifies as a primary co-operative agricultural and rural development bank or a primary agricultural credit society for the purpose of section 80P(4) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Opposition to Law and Facts: The revenue contended that the order of the CIT(A) was opposed to the law and the facts of the case. The CIT(A) had allowed the claim of the assessee for exemption under section 80P of the Income Tax Act, which the revenue challenged. 2. Correctness of Allowing the Claim under Section 80P(2)(a)(i): The respondent-assessee, a cooperative society, had claimed exemption under section 80P(2)(a)(i) for the assessment year 2012-13. The Assessing Officer (AO) denied this exemption, stating that the assessee was a co-operative bank and not a primary co-operative credit society or a primary co-operative agricultural and rural development bank, thus falling under the exclusion provided by section 80P(4). The CIT(A) allowed the claim based on a prior ITAT decision in the case of Janapragathi Credit Co-operative Society. 3. Qualification as a Primary Co-operative Agricultural and Rural Development Bank or Primary Agricultural Credit Society: The critical issue was whether the respondent-assessee qualified as a primary co-operative agricultural and rural development bank or a primary agricultural credit society. The provisions of section 80P(4) exclude co-operative banks, except for primary agricultural credit societies and primary co-operative agricultural and rural development banks, from availing deductions under section 80P. The tribunal examined the definition and conditions under section 80P(4) and the relevant byelaws of the respondent-assessee. According to clause 19 of the byelaws, the respondent-assessee could entertain deposits from various sources, including agriculturists and institutions, but its area of operation was not confined to a taluk. Consequently, it did not qualify as a primary co-operative agricultural and rural development bank. The tribunal also referred to the decision of the Kerala High Court in Kerala State Co-operative Agricultural & Rural Development Bank Ltd. Vs. CIT, which clarified that for an entity to be considered a primary co-operative agricultural and rural development bank, its area of operation must be confined to a taluk, and it should primarily provide long-term credit for agricultural and rural development activities. Since the respondent-assessee did not meet these criteria, the tribunal concluded that the provisions of section 80P(4) were applicable, and the assessee was not entitled to the deduction under section 80P of the Act. Conclusion: The tribunal held that the CIT(A) had misdirected itself by applying the decision in the case of Janapragathi Credit Co-operative Society, which was not applicable to the present case. The appeal filed by the revenue was allowed, and the respondent-assessee was not entitled to the deduction under section 80P of the Income Tax Act. Order: The appeal filed by the revenue was allowed, and the order was pronounced in the open court on 20th December 2017.
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