2020 (9) TMI 275 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - As per AO assessee was essentially doing the business of banking and therefore in view of insertion of section 80P(4) with effect from 1-4-2007 the assessee will not be entitled to deduction u/s 80P - HELD THAT -Narration in loan extracts in the audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed i.e. whether it is for agricultural purpose or non-agricultural purpose. In these cases such a detailed examination has not been conducted by the A.O. There should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed i.e. whether it for agricultural purpose or not. The A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act 1969 before denying the claim of deduction u/s 80P(2) - the issue raised in these appeals is restored to the files of the Assessing Officer. - Directions to follow case THE MAVILAYI SERVICE CO-OPERATIVE BANK LTD. 2019 (3) TMI 1580 - KERALA HIGH COURT - Appeals filed by the assessee are allowed for statistical purposes

Summary

Issues:
- Whether the CIT(A) was justified in confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T. Act.

Analysis:
1. Background: The appeals were against CIT(A) orders dated 10-12-2019 for assessment years 2010-2011 and 2012-2013 to 2015-2016.

2. Common Issue: The appeals raised a common issue regarding the denial of deduction u/s 80P(2)(a)(i) of the I.T. Act by the CIT(A).

3. Assessee's Position: The assessee, a cooperative society, filed 'Nil' returns claiming deduction u/s 80P. However, the Assessing Officer disallowed the deduction, considering the society's activities akin to banking.

4. CIT(A) Decision: The CIT(A) upheld the disallowance based on the society's minimal agricultural credit activities, following a judgment by the jurisdictional High Court.

5. Tribunal's Decision: The Tribunal noted conflicting judgments by the High Court regarding the eligibility for deduction u/s 80P. It emphasized the need for a factual examination of the society's activities for each assessment year.

6. Fresh Examination: The Tribunal directed the Assessing Officer to reexamine the nature of each loan disbursement to determine if they were for agricultural purposes. The A.O. was instructed to follow the Full Bench decision and decide accordingly.

7. Legal Analysis: The Tribunal highlighted that a detailed assessment of loan purposes is essential to ascertain eligibility for deduction u/s 80P, emphasizing the need for compliance with the activities of a primary agricultural credit society.

8. Outcome: The appeals were allowed for statistical purposes, and the stay applications were dismissed as the issue was resolved. The matter was remanded to the Assessing Officer for a fresh examination based on the Tribunal's directives.

This detailed analysis covers the key legal aspects, judgments, and the Tribunal's decision regarding the denial of deduction u/s 80P(2)(a)(i) of the I.T. Act in the mentioned case.