2018 (2) TMI 1820 - AT - Income Tax

Tribunal upholds deduction for Agricultural Credit Society under section 80P

The Income Tax Officer, Ward 1 (1), Salem. Versus M/s. S-1308, Ammapet Primary Agricultural Co-operative Bank Ltd.,

The Tribunal dismissed the Revenue's appeal, affirming the allowance of deduction under section 80P(2)(a)(i) for the Primary Agricultural Co-operative ... Entitlement for deduction u/s 80P(2)(a)(i) - assessee is “Primary Agricultural Co-operative Credit Society” registered under “Tamilnadu Co-operative Societies Act” - Held that:- In the present assessee’s own case for earlier assessment years, the Coordinate Benches of the Tribunal has clearly held that the assessee are not cooperative bank and that their 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. Therefore, the assessee societies are eligible for deduction u/s 80P(2)(a)(i). The contention of the Revenue that the members of the assessee societies are not entitled to receive any dividend or having any voting right or no right to participate in the general administration or to attend any meeting etc., because they are admitted as associate members for availing loan only and was also charging a higher rate of interest at the rate of 14%, is not a ground to deny the exemption granted under section 80P(2)(a)(i) of the Act. - Decided against revenue. Issues Involved:Appeal against order allowing deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961.Analysis:Issue 1: Deduction under Section 80P(2)(a)(i) of the ActThe case involved a Primary Agricultural Co-operative Credit Society engaged in trading PDS commodities, claiming deductions under sections 80P(2)(a)(i) and 80P(2)(d) of the Act. The Assessing Officer disallowed the deduction under section 80P(2)(a)(i) but allowed under section 80P(2)(d). On appeal, the CIT(A) allowed the deduction following Tribunal decisions. The Revenue contended that the decision in The Citizen Co-operative Limited case favored the assessee. However, the assessee cited judgments by the Madras High Court supporting their position. The Tribunal noted conflicting views but upheld the assessee's claim, emphasizing the specific nature of the society's activities and eligibility for deduction under section 80P(2)(a)(i) based on previous Tribunal and High Court decisions.Issue 2: Interpretation of Cooperative Society StatusThe Tribunal analyzed the nature of the cooperative society in question, considering the activities and eligibility for deduction under section 80P. The Hon'ble Supreme Court's judgment in The Citizen Co-operative Limited case was examined, emphasizing the exclusion of cooperative banks from section 80P but allowing primary agriculture credit societies to claim the deduction. The Tribunal differentiated the society in question from a cooperative bank, highlighting the specific criteria for eligibility under section 80P. The Tribunal concluded that the society's activities aligned with the requirements for deduction under section 80P(2)(a)(i) based on previous legal precedents and upheld the CIT(A)'s decision.Conclusion:The Tribunal dismissed the Revenue's appeal, affirming the allowance of deduction under section 80P(2)(a)(i) for the Primary Agricultural Co-operative Credit Society. The decision was based on the specific nature of the society's operations, in line with previous Tribunal and High Court judgments supporting the eligibility for deduction under section 80P. The Tribunal's analysis focused on the legal interpretations of cooperative society status and the criteria for claiming deductions under the Income Tax Act, ultimately upholding the CIT(A)'s decision in favor of the assessee.