2018 (10) TMI 282 - AT - Income Tax

Tribunal Upholds Deduction for Agricultural Society Under Income Tax Act

M/s. Nedumon Service Cooperative Bank Limited Versus The Income Tax Officer Ward 5 Kollam And Vice-Versa

The Tribunal upheld the CIT(A)'s decision, allowing the deduction u/s 80P(2) of the Income Tax Act for the primary agricultural credit society, ... Claim of deduction u/s 80P(2) - assessee is a primary agricultural credit society, registered under the Kerala Co-operative Societies Act, 1969 - Held that:- In the instant case, the assessee is primary agricultural society. A certificate to the above effect is on record. In view of the judgment of the Hon'ble Jurisdictional High Court in the case of The Chirakkal Service Co-op Bank Ltd. & Ors. (2016 (4) TMI 826 - KERALA HIGH COURT), we hold that the assessee-society is entitled to the benefit of deduction u/s. 80P of the Act. Eligible for deduction u/s 80P(2)(a)(i) - co-operative societies engaged in providing credit facilities to its members, in course of its business had made investments with treasury, bank etc. and earned interest income - Held that:- In the instant case the assessee had made investments with sub-treasuries and banks in the course of its business of banking / providing credit facilities to its members. Therefore, it was entitled to deduction u/s 80P(2)(a)(i) in respect of interest income that was received on such investments. See Vaveru Co-operative Rural Bank Ltd. v CIT [2017 (4) TMI 663 - ANDHRA PRADESH HIGH COURT]. Issues involved:1. Denial of deduction u/s 80P(2) of the Income Tax Act.2. Treatment of interest income from investments with a cooperative bank as income from other sources.3. Entitlement to deduction u/s 80P(2)(a)(i) and u/s 80P(2)(d) of the Income Tax Act.Detailed Analysis:1. The case involved cross-appeals against the CIT(A)'s order denying deduction u/s 80P(2) of the Income Tax Act for the assessment year 2014-2015. The Assessing Officer rejected the deduction, stating that the assessee, a primary agricultural credit society, was primarily engaged in banking activities and therefore not entitled to the deduction. The issue was whether the assessee qualified for the deduction under section 80P(2) of the Act. The CIT(A) allowed the deduction based on a judgment of the jurisdictional High Court, recognizing the assessee as a primary agricultural credit society entitled to the deduction. The Tribunal upheld the CIT(A)'s decision, citing the judgment and confirming the assessee's eligibility for the deduction.2. The second issue revolved around the treatment of interest income of Rs. 1,13,93,354 from investments with a cooperative bank as income from other sources. The Assessing Officer denied the claim of deduction u/s 80P(2)(a)(i) of the Income Tax Act. The CIT(A) upheld this view. However, the Tribunal, considering various judicial pronouncements, allowed the deduction under section 80P(2)(a)(i) based on the nature of investments made by the assessee with sub-treasuries and banks in the course of its business of providing credit facilities, in line with relevant legal precedents.3. The final issue was the entitlement to deduction u/s 80P(2)(d) of the Income Tax Act. The Tribunal rejected this claim, stating that such deduction could only be granted when interest income is received from investments with a cooperative society and not a cooperative bank. However, the Tribunal allowed the deduction u/s 80P(2)(a)(i) based on the nature of investments made and following judicial pronouncements that supported the eligibility of the assessee for the deduction. The Tribunal partially allowed the assessee's appeal while dismissing the Revenue's appeal, thereby concluding the case.This detailed analysis highlights the key legal arguments, judgments, and decisions made by the Tribunal in addressing the issues raised in the cross-appeals related to the deduction under section 80P(2) of the Income Tax Act for the assessment year 2014-2015.