2017 (1) TMI 951 - AT - Income Tax

Tribunal affirms CIT(A) decision in favor of Cooperative Society for deduction under section 80P(2)

The Income Tax Officer Ward 3, Tirur Versus Pallikkal Service Coop Bank Ltd.

The Tribunal upheld the CIT(A)'s decision in favor of the Cooperative Society, allowing the deduction under section 80P(2) of the Income Tax Act. The ... Benefit of deduction u/s 80P(2) to the assessee society - Held that:- The Hon’ble jurisdictional High Court in the case of The Chirakkal Service Cooperative Bank Ltd & others (2016 (4) TMI 826 - KERALA HIGH COURT ) has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 is entitled to the benefit of deduction u/s 80P(2) - Decided in favour of assessee Issues involved:Interpretation of section 80P(2) of the Income Tax Act for a Cooperative Society engaged in lending activities primarily for non-agricultural purposes.Analysis:The appeal before the Appellate Tribunal ITAT Cochin concerned the interpretation of section 80P(2) of the Income Tax Act for a Cooperative Society registered under the Kerala Cooperative Societies Act, 1969. The Assessing Officer disallowed the deduction claimed under section 80P(2) on the grounds that the society was primarily engaged in lending for non-agricultural purposes, akin to commercial banks. The issue was whether the society was entitled to the deduction under section 80P(2). The CIT(A), relying on the judgment of the Hon'ble jurisdictional High Court in a similar case, ruled in favor of the assessee, directing the Assessing Officer to grant the deduction.The Tribunal noted that the Hon'ble jurisdictional High Court had previously held that primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 were entitled to the benefit of deduction under section 80P(2). The High Court emphasized that the purpose and objects of societies registered under the State law must be understood as approved by the competent authority under that law. The Tribunal observed that the society in question had been classified as a primary agricultural credit society by the competent authority under the Kerala Cooperative Societies Act, and its bye-laws reflected this classification.The Tribunal, following the precedent set by the Hon'ble High Court, held that the society was indeed entitled to the benefit of deduction under section 80P(2) of the Income Tax Act. It emphasized that the society's classification as a primary agricultural credit society under the Kerala Cooperative Societies Act was crucial in determining its eligibility for the deduction. Therefore, the Tribunal upheld the CIT(A)'s decision to direct the Assessing Officer to grant the benefit of section 80P(2) to the assessee society.In conclusion, the Tribunal dismissed the appeal filed by the revenue, affirming the CIT(A)'s order in favor of the assessee society. The judgment highlighted the importance of the society's classification and primary business activities in determining its eligibility for the deduction under section 80P(2) of the Income Tax Act.