Cooperative society deduction under section 80P(2)(a)(i) remanded for fresh determination of eligibility status

ITAT Jodhpur remanded the case back to AO for fresh adjudication regarding deduction u/s 80P(2)(a)(i). AO denied the claim stating assessee was a cooperative bank carrying on banking business, not a Primary Agricultural Credit Society, thus ineligible for deduction under section 80P(4). However, ITAT found insufficient evidence on record to determine whether assessee was actually a primary agricultural credit society providing financial accommodation solely for agricultural purposes or a cooperative bank conducting banking business. The tribunal noted contradictory submissions and lack of concrete findings, necessitating fresh examination with proper opportunity of hearing.

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Issues Involved:
1. Deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.
2. Computation of total income including depreciation and dividend income.
3. Applicability of Section 80P(2)(a)(i) based on the decision in DCIT Vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd.
4. Deduction under Section 80P(2)(c)(ii) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961:
The primary grievance of the assessee pertains to the denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The assessee claimed that it was a cooperative society engaged in providing credit facilities to its members, primarily for agricultural purposes. However, the Assessing Officer (AO) observed that the society was also involved in non-agricultural activities such as advancing loans for dairy, drainage, fencing, rural housing, and non-agricultural purposes. Consequently, the AO concluded that the assessee did not qualify as a "Primary Agricultural Credit Society" but rather as a cooperative bank, thus disqualifying it from the deduction under Section 80P(2)(a)(i) as per Section 80P(4).

2. Computation of Total Income Including Depreciation and Dividend Income:
The assessee contested the computation of total income amounting to Rs. 60,85,941/- under Section 80P(4) without considering the deduction of depreciation amounting to Rs. 2,46,136/- and deduction under Section 80P(2)(d) on dividend income amounting to Rs. 5,000/- and Rs. 6,34,700/- from KRISCO and APEX Bank. The assessee argued that these items were allowable while calculating the total income and should have been separately shown in the Profit & Loss account.

3. Applicability of Section 80P(2)(a)(i) Based on the Decision in DCIT Vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd.:
The assessee cited the decision in DCIT Vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd., where it was held that the provisions of Section 80P(4) apply only to cooperative banks and not to cooperative societies providing credit facilities to their members. The ITAT Panaji Bench had clarified that the new proviso to Section 80P(4) was intended to bring cooperative banks into the taxation structure, akin to commercial banks, and not to affect cooperative societies. This decision was not considered by the AO or the CIT(A) in the present case.

4. Deduction under Section 80P(2)(c)(ii) of the Income Tax Act, 1961:
The assessee also raised an issue regarding the denial of deduction under Section 80P(2)(c)(ii) amounting to Rs. 50,000/-. The CIT(A) upheld the AO's decision, citing that the assessee failed to provide documentary evidence to establish that the findings of the AO were incorrect. The AO had pointed out that the society's activities included advancing loans for non-agricultural purposes, thus disqualifying it from the deduction under Section 80P.

Conclusion:
The Tribunal noted that the AO did not provide a concrete finding based on evidence whether the assessee was a "cooperative bank" or a "primary agricultural credit society." Additionally, the Tribunal observed that the decision in DCIT Vs. Jayalakshmi Mahila Vividodeshagala Souharda Sahakari Ltd. was not considered by the lower authorities. Therefore, the Tribunal set aside the issue and remanded it back to the AO for fresh adjudication in accordance with the law, after providing a reasonable opportunity of hearing to the assessee.

Order:
The appeal of the assessee was allowed for statistical purposes, and the matter was remanded back to the AO for fresh consideration.

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