2018 (9) TMI 408 - AT - Income Tax

Tribunal affirms agricultural society's tax deductions under Income Tax Act, emphasizes nature of activities

The Tribunal upheld the decision allowing a primary agricultural credit society the deduction under section 80P(2) of the Income Tax Act, emphasizing the ... Entitled to deduction u/s. 80P(2)(i)(a) - Whether the interest earned on investment made with sub-treasury and Banks is entitled for deduction u/s. 80P(2)(i)(a)? - Held that:- As in the case of Chirakkal Service Co-operative Society [2016 (4) TMI 826 - KERALA HIGH COURT] the assessee is entitled to deduction u/s. 80P(2) of the I.T. Act and directed the Assessing Officer to allow deduction u/s. 80P of the Act. Assessee was entitled to deduction u/s 80P(2)(a)(i) for the interest received on investment made with sub-treasuries and banks - Held that:- Interest earned from investment with sub-treasuries and Banks was part of the banking activities, and therefore, the said income was entitled to deduction u/s 80P(2)(a)(i). Hence, Padne Service Co-operative Bank Limited v. ITO (I2018 (1) TMI 602 - ITAT COCHIN) we hold that the CIT(A) is justified in directing the A.O. to grant deduction u/s 80P(2)(a)(i) of the I.T. Act for the interest earned on the investments made with sub-treasuries and Banks. It is ordered accordingly. Issues:1. Entitlement to deduction u/s. 80P(2)(i)(a) of the I.T. Act.2. Eligibility for deduction u/s. 80P(2)(i)(a) of the I.T. Act on interest earned from investments made with sub-treasury and Banks.Analysis:Issue 1: Entitlement to deduction u/s. 80P(2)(i)(a) of the I.T. Act:The case involved a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The Assessing Officer denied the deduction u/s. 80P(2) of the I.T. Act, contending that the society was primarily engaged in banking activities. However, the CIT(A) referred to a judgment and directed the Assessing Officer to allow the deduction u/s. 80P of the Act. The Tribunal upheld this decision, citing the judgment of the Hon'ble High Court of Kerala in a similar case. The Tribunal concluded that the society was entitled to the benefit of deduction u/s. 80P(2) of the Act based on the nature of its activities as a primary agricultural credit society.Issue 2: Eligibility for deduction u/s. 80P(2)(i)(a) of the I.T. Act on interest earned from investments made with sub-treasury and Banks:Regarding the interest income received on investments made with sub-treasury and banks, the CIT(A) relied on a Tribunal order and directed the Assessing Officer to allow the deduction u/s. 80P(2)(a)(i) of the I.T. Act. The Tribunal, in line with previous decisions, held that the interest income earned from such investments was part of the banking activities and thus eligible for the deduction u/s. 80P(2)(a)(i) of the Act. The Tribunal referred to specific cases where similar decisions were made, supporting the eligibility of the society for the deduction.In conclusion, the Tribunal dismissed the Revenue's appeal and the Cross Objection filed by the assessee, affirming the entitlement of the society to deductions under the specified sections of the I.T. Act. The judgment highlighted the importance of the nature of activities carried out by the society in determining its eligibility for tax deductions, as supported by relevant legal precedents and interpretations.