Tribunal directs detailed inquiry on loans for agricultural credit societies under Section 80P

The Tribunal directed the Assessing Officer to conduct a detailed inquiry into the purpose of each loan disbursement by the assessees to ascertain if they qualify as primary agricultural credit societies. The issue was remanded back to the Assessing Officer for fresh consideration in line with the Full Bench judgment emphasizing a case-by-case assessment for eligibility under section 80P. The Tribunal stressed the need for a thorough examination to differentiate between agricultural and non-agricultural loans. The appeals were allowed for statistical purposes, and stay applications were dismissed as the appeals were disposed of.

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Issues:
- Whether the CIT(A) was justified in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.ActRs.

Analysis:
The appeals were filed by different assessees against orders of the CIT(A) denying deduction u/s 80P of the I.T.Act. The Assessing Officer disallowed the deduction claiming that the assessees were essentially engaged in banking activities and thus ineligible for the deduction post the insertion of section 80P(4) of the I.T.Act. The CIT(A) upheld this disallowance based on factual findings that the assessees were not primary agricultural credit societies. The assessees contended that they were entitled to the deduction under section 80P. The Tribunal noted conflicting decisions by the Kerala High Court regarding the eligibility for deduction under section 80P. The Full Bench of the High Court in a recent judgment emphasized that each assessment year requires a fresh examination by the Assessing Officer to determine eligibility for the deduction. The Tribunal, aligning with this view, directed the Assessing Officer to conduct a detailed inquiry into the purpose of each loan disbursement by the assessees to ascertain if they qualify as primary agricultural credit societies. The issue was remanded back to the Assessing Officer for fresh consideration in line with the Full Bench judgment.

The Tribunal highlighted that the Assessing Officer must scrutinize individual loan disbursements to distinguish between agricultural and non-agricultural loans. The Tribunal emphasized that the mere narration in loan extracts may not be conclusive evidence of the loan purpose. The Tribunal underscored the need for a thorough examination by the Assessing Officer to determine if the loans were disbursed for agricultural purposes. The Tribunal directed the Assessing Officer to list instances of non-agricultural loans to assess compliance with the activities of primary agricultural credit societies under the Kerala Co-operative Societies Act, 1969. The Tribunal instructed the assessees to cooperate with the Assessing Officer and furnish necessary details without seeking unnecessary adjournments.

The Tribunal allowed the appeals for statistical purposes and dismissed the stay applications filed by the assessees as infructuous since the appeals were disposed of. The decision was pronounced on July 8, 2020, by the Tribunal.

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