2019 (1) TMI 1009 - AT - Income Tax

Tribunal Upholds Deduction for Agricultural Credit Societies Under Income Tax Act

The Income Tax Officer Versus M/s. Badaggara Co-op Rural Bank Limited Badagara, M/s. The Quilandy Service Co-operative Bank Limited, M/s. Ulliyeri Service Cooperative Bank Ltd., M/s. Mannarkkad Rural Service Co-operative Bank Limited, M/s. TheKulapully Service Co-operative Bank Limited M/s. Mannarkkad Rural Service Co-operative Bank Limited Versus The Income Tax Officer

The Tribunal upheld the entitlement of primary agricultural credit societies under the Kerala Cooperative Societies Act to deduction under section 80P(2) ... Entitlement to deduction u/s. 80P(2)(a)(i) - assessee are primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 - Held that:- Admittedly, the assessee are primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969. The Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. (2016 (4) TMI 826 - KERALA HIGH COURT) had held that a 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:- Entitlement to deduction u/s. 80P(2)(a)(i) of the I.T. Act.Analysis:1. Facts of the Case:The assessees, primary agricultural credit societies under the Kerala Cooperative Societies Act, filed returns claiming deduction u/s. 80P of the I.T. Act. The Assessing Officer denied the deduction, citing that the assessees were primarily engaged in banking, thus not eligible for the deduction.2. First Appellate Authority's Decision:The CIT(A) ruled in favor of the assessees, citing the judgment in the case of Chirakkal Service Co-operative Bank Ltd. The CIT(A) directed the Assessing Officer to allow the deduction u/s. 80P of the Act, distinguishing it from the decision in the case of M/s.Citizen Co-operative Society Ltd. v. ACIT, Hyderabad.3. Revenue's Appeal:The Revenue appealed the CIT(A)'s decision. The Departmental Representative argued against the assessees' entitlement to deduction, while the learned AR contended that the issue was settled in favor of the assessees by the High Court's judgment in the Chirakkal Service Co-op Bank Ltd. case.4. Tribunal's Analysis and Decision:The Tribunal noted that the assessees were classified as primary agricultural credit societies under the Kerala Cooperative Societies Act. Referring to the High Court's judgment, the Tribunal held that the assessees were entitled to the deduction u/s. 80P(2) of the Act. The Tribunal dismissed the Revenue's appeal and the Cross Objection filed by the assessee as infructuous.5. Precedent and Applicability:The Tribunal clarified that the decision in Citizen Co-operative Society Ltd. v. ACIT was not applicable to primary agricultural credit societies in Kerala, as per the ITAT Cochin Bench's order in the case of ITO v. M/s.Maruthonkara Service Co-operative Bank Ltd.6. Final Verdict:On January 17, 2019, the Tribunal pronounced the order, dismissing both the Revenue's appeals and the Cross Objection filed by the assessee, confirming the entitlement of the assessees to the deduction u/s. 80P of the Income Tax Act.