2021 (2) TMI 639 - AT - Income Tax

Denial of deduction u/s 80P - assessee is a Primary Agricultural Credit Co-operative Society registered under Kerala Cooperative Act - 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. 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. (supra) the AO is directed to grant the assessee the benefit of deduction under Section 80P as claimed.

Summary

Issues:
- Denial of deduction under Section 80P to a Primary Agricultural Credit Co-operative Society.
- Interpretation of the Full Bench judgment of the Hon'ble Kerala High Court.
- Impact of the decision of the Hon'ble Supreme Court in Civil Appeal Nos. 7343 to 7350 of 2019.
- Compliance with the principles of mutuality as per the decision in the case of Citizen Co-operative Society Ltd.

Analysis:
1. The appeals were filed against the CIT(A)'s order denying deduction under Section 80P to a Primary Agricultural Credit Co-operative Society for various assessment years. The denial was based on the society not providing financial accommodation to its members for agricultural purposes or activities related to agriculture.

2. The CIT(A) upheld the denial of deduction under Section 80P, following the Full Bench decision of the Hon'ble Kerala High Court in a similar case. The society was represented by a Chartered Accountant, and the Revenue was represented by a Senior Departmental Representative.

3. The society appealed further, citing the Hon'ble Supreme Court's decision in Civil Appeal Nos. 7343 to 7350 of 2019. The Supreme Court emphasized interpreting Section 80P liberally in favor of the assessee and clarified that restrictions or limitations cannot be implied where none exist explicitly. The judgment set aside the Full Bench decision of the Kerala High Court.

4. The Departmental Representative argued against granting the deduction, citing non-compliance with the principles of mutuality as per the Citizen Co-operative Society Ltd. case. However, the Tribunal considered the Supreme Court's decision and directed the Assessing Officer to grant the deduction under Section 80P to the society, aligning with the liberal interpretation mandated by the Supreme Court.

5. Consequently, the appeals of the society were allowed, and the Stay Petitions filed by the society were dismissed. The Tribunal's decision was based on the principles laid down by the Hon'ble Supreme Court, emphasizing a liberal and reasonable interpretation of Section 80P to benefit cooperative societies in the co-operative sector.