2025 (3) TMI 520 - AT - Income Tax

Deduction denied u/s. 80P(2)(d) - assessee has two classes of members; A class as well as B class - assessee is a primary agricultural co-operative credit society registered under the Tamilnadu Co-operative Societies Act 1983 HELD THAT - According to Ld.AR as decided by Apex Court in the case of Mavilayi Service Co-operative Bank 2021 (1) TMI 488 - SUPREME COURT assessee s claim would be allowable since similar provisions are governing the present case of assessee i.e. TamilNadu Co-operative Societies Act and hence giving loans by the assessee/primary agricultural credit society to its B class members is perfectly valid because the definition of member under the TNCS Act permits loans to be given to B class members Hence giving loan to B class members would not disqualify assessee from claiming deduction u/s. 80P(2)(a)(i) of the Act. Therefore we allow the appeal of the assessee and direct the AO to grant 80P deduction. Appeal of the assessee is allowed.

1. ISSUES PRESENTED and CONSIDERED

The core legal issues considered in this judgment were:

Whether the delay in filing the appeal by the primary agricultural co-operative credit society before the Commissioner of Income Tax (Appeals) should be condoned.
Whether the assessee is entitled to the deduction under Section 80P(2)(d) of the Income Tax Act, 1961, given the classification of its members into 'A' class and 'B' class members.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of Delay

Relevant legal framework and precedents: The consideration for condonation of delay typically involves examining whether there was a reasonable cause for the delay and whether the delay should be excused in the interest of justice.
Court's interpretation and reasoning: The Court considered the affidavit submitted by the assessee explaining the delay. The delay was attributed to the assessee's unawareness of the assessment order until March 2020 and the subsequent impact of the COVID-19 pandemic, which paralyzed institutional functioning.
Key evidence and findings: The affidavit from the assessee's secretary and the Department's circular extending the period of limitation due to the pandemic were crucial in the Court's decision to condone the delay.
Application of law to facts: The Court applied the extended limitation period under the Taxation and other laws (Relaxation and Amendment of certain Provisions of the Act, 2020) and found that the appeal was filed within the permissible period.
Conclusions: The Court condoned the delay, allowing the appeal to be adjudicated on its merits.

Issue 2: Entitlement to Deduction under Section 80P(2)(d)

Relevant legal framework and precedents: Section 80P of the Income Tax Act provides deductions to cooperative societies, and the interpretation of 'members' under this section was crucial. The Court referred to precedents including the decisions in PCIT vs. S-1306 Ammapet Primary Agricultural Cooperative Bank Ltd. and Mavilayi Service Cooperative Bank Ltd. & Ors. Vs. CIT.
Court's interpretation and reasoning: The Court noted that under the Tamilnadu Co-operative Societies Act, the definition of 'members' includes 'associate members'. The Court found that the Assessing Officer erred in distinguishing between 'A' class and 'B' class members for the purpose of Section 80P.
Key evidence and findings: The Court relied on the TNCS Act's definition of 'members' and the provisions allowing loans to 'B' class members. The Court also considered the precedents which clarified that 'associate members' are indeed 'members' for the purpose of Section 80P.
Application of law to facts: The Court applied the definition of 'members' under the TNCS Act and the judicial precedents to conclude that the assessee was entitled to the deduction, as the loans to 'B' class members did not disqualify the society from claiming the deduction.
Treatment of competing arguments: The Revenue's reliance on the distinction between 'A' and 'B' class members was rejected based on the statutory definitions and judicial interpretations.
Conclusions: The appeal was allowed, and the Assessing Officer was directed to grant the deduction under Section 80P(2)(d) to the extent of Rs. 7,06,759/-.

3. SIGNIFICANT HOLDINGS

Preserve verbatim quotes of crucial legal reasoning: "The definition of the word 'members' includes an associate member and therefore, the Assessing Officer fell into an error in drawing a distinction between A Class members and B Class members."
Core principles established: The Court reinforced that the definition of 'members' under the relevant state cooperative societies act should be applied when determining eligibility for deductions under Section 80P of the Income Tax Act. The Court also emphasized that benevolent provisions like Section 80P should be interpreted liberally.
Final determinations on each issue: The delay in filing the appeal was condoned, and the deduction under Section 80P(2)(d) was granted to the assessee.