2021 (1) TMI 1077 - AT - Income Tax

Entitled to deduction u/s 80P - Denial of deduction as assessee had not fulfilled the primary object of a Primary Agricultural Credit Society in so far as it was not providing financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities - HELD THAT - A perusal of the decision of the Hon'ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT clearly shows that the Hon'ble Supreme Court has set aside the decision of the Full Bench of the Hon'ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. 2019 (3) TMI 1580 - KERALA HIGH COURT . The Hon'ble Supreme Court has also further explained the decision in the case of Citizen Co-operative Society Ltd. 2017 (8) TMI 536 - SUPREME COURT in so far as the deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. In the circumstances in respectful obedience to the principles laid down by the Hon'ble Supreme Court in the case of The Mavilayi Service Co-operative Bank Ltd. 2021 (1) TMI 488 - SUPREME COURT the AO is directed to grant the assessee the benefit of deduction under Section 80P as claimed. Appeal filed by the assessee is allowed.

Summary

Issues:
Appeal against denial of deduction under Section 80P for AY 2016-17.

Analysis:
The assessee, a Primary Agricultural Credit Co-operative Society, filed for deduction under Section 80P, which was denied for not fulfilling the primary object of providing financial accommodation for agricultural purposes. The CIT(A) upheld the denial based on a Full Bench decision of the Kerala High Court. However, the Tribunal noted that the Supreme Court had set aside the High Court's decision, emphasizing a liberal interpretation of Section 80P and the exclusion of cooperative banks engaged in banking activities. Loans to nominal members under the Kerala Act were considered eligible for deduction, and the Tribunal directed the AO to grant the deduction as claimed.

Conclusion:
In light of the Supreme Court's ruling, the Tribunal allowed the appeal, overturning the denial of deduction under Section 80P for the assessee, a Primary Agricultural Credit Co-operative Society. The decision emphasized the need for a liberal interpretation of the provision and clarified the eligibility criteria for deduction, directing the AO to grant the benefit claimed by the assessee.