2018 (8) TMI 269 - AT - Income Tax

Entitled to deduction u/s. 80P(2)(a)(i) - assessees are primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 - Held that - Admittedly, the assessees are primary agricultural credit societes registered under the Kerala Cooperative Societies Act, 1969. The Hon ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a primary agricultural credit society, registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s. 80P(2). - Decided against revenue

Summary

Issues:
Whether the assessee is entitled to deduction u/s. 80P(2)(a)(i) of the I.T.Act.

Analysis:
The case involved primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969, claiming deduction u/s. 80P(2)(a)(i) of the I.T. Act for the assessment year 2013-2014. The Assessing Officer denied the deduction, citing the assessees' primary engagement in banking activities and the provisions of section 80P(4) of the I.T. Act. The CIT(A) allowed the deduction based on the judgment of the Jurisdictional High Court in a similar case. The Revenue appealed, arguing against the CIT(A)'s decision. The High Court had previously held that primary agricultural credit societies are entitled to deduction u/s. 80P(2) of the I.T. Act. The Tribunal upheld this decision, emphasizing that the societies' classification under the Kerala Cooperative Societies Act as primary agricultural credit societies entitles them to the exemption under section 80P. The Tribunal dismissed the Revenue's appeals based on the High Court's judgment and allowed the deduction u/s. 80P(2) for the assessees.

This judgment clarifies the eligibility of primary agricultural credit societies for deduction u/s. 80P(2) of the I.T. Act based on their classification under the Kerala Cooperative Societies Act. The decision aligns with the High Court's interpretation, emphasizing the societies' primary objective of agricultural credit activities and loan provisions for agricultural purposes. The Tribunal's ruling highlights the importance of statutory provisions and bye-laws in determining the entitlement to tax exemptions under section 80P. By referencing the High Court's findings and the societies' operational limitations to specific areas, the Tribunal affirms the assessees' right to claim the deduction u/s. 80P(2) as primary agricultural credit societies. The judgment underscores the significance of legal classification and operational focus in determining tax benefits for specific types of cooperative societies, ensuring adherence to legislative intent and statutory definitions in granting exemptions under the I.T. Act.