2015 (4) TMI 1135 - AT - Income Tax

Tribunal affirms deduction for interest income on jewel and other loans, distinguishing cooperative banks.

The Tribunal dismissed the Revenue's appeals and the assessee's cross objections, affirming the CIT(A)'s decision to allow the deduction under section ... Eligibility of deduction under section 80P(2(a)(i) - denial of claim on interest income towards jewel loan and other loan on the ground that the purpose of loan issued was for commercial activities and not for agricultural activities - Held that:- We uphold the orders of the Commissioner of Income Tax (Appeals) in allowing the claim of the assessee under section 80P(2a)(i) of the Act on the interest income on jewel loan and other loans and reject the grounds raised by the Revenue in all these appeals. AS decided in ITO Vs. M/s.Veerakeralam Primary Agricultural Co-operative Credit Society [2015 (7) TMI 557 - ITAT CHENNAI] the assessee is not a co-operative bank. The activities in the nature of accepting deposits, advancing loans etc., carried on by the assessee are confined to its members only and that too in a particular geographical area. The activities of the assessee are not regulated by the RBI or the provisions of the Banking Regulation Act. Thus, in view of the above stated facts and various decisions considered above, we do not find any infirmity in the order of the CIT(Appeals). - Decided in favour of assessee Issues:Appeals by Revenue against CIT(A) orders for assessment years 2006-07 to 2008-09 and 2010-11; Deduction under section 80P(2)(a)(i) allowed by CIT(A); Applicability of Tribunal decisions on similar cases.Analysis:1. Deduction under Section 80P(2)(a)(i):- The central issue in the appeals was the allowance of deduction under section 80P(2)(a)(i) of the Income Tax Act. The Assessing Officer denied the deduction for interest income on jewel loan and other loans, arguing that the loans were for commercial activities, not agricultural activities. However, the CIT(A) allowed the deduction based on previous Tribunal decisions, including the case of The Salem Agricultural Producers Co-operative Marketing Society Ltd. vs. ITO. The Tribunal concurred with the CIT(A) and held that the issue was already settled in favor of the assessee by previous decisions. The Tribunal directed the assessing authority to grant the benefit of deduction under section 80P(2)(a)(i) to the assessee.2. Precedents and Tribunal Decisions:- The Tribunal referred to various Tribunal decisions to support its conclusion. In the case of ITO vs. M/s. Veerakeralam Primary Agricultural Co-operative Credit Society, it was established that the benefit of section 80P was not available to cooperative banks but was entitled to Primary Agricultural Credit Societies. The Tribunal analyzed the definitions of 'co-operative bank' and 'Primary Agricultural Credit Society' as per the Banking Regulation Act, 1949, and concluded that credit co-operative societies were not the same as cooperative banks. This interpretation was further supported by a judgment of the Hon'ble Gujarat High Court. The Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80P(2)(a)(i) for the interest income on jewel loan and other loans.3. Cross Objections by Assessee:- The cross objections filed by the assessee were in support of the CIT(A)'s orders. Since the Tribunal upheld the CIT(A)'s decisions, the cross objections were deemed infructuous and dismissed.4. Final Verdict:- Ultimately, the Tribunal dismissed all the appeals by the Revenue and the cross objections by the assessee. The Tribunal affirmed the CIT(A)'s decision to allow the deduction under section 80P(2)(a)(i) for the interest income on jewel loan and other loans. The orders of the lower authorities denying the deduction were set aside, and the assessing authority was directed to grant the benefit of deduction to the assessee as per the provisions of section 80P(2)(a)(i) of the Income Tax Act.