Tribunal Orders Fresh Review of Loan Deductions u/s 80P(2) for Agricultural Credit Societies in Kerala.

The Tribunal remanded the case to the Assessing Officer (AO) for a fresh examination, directing the AO to re-evaluate the nature of each loan disbursement to determine eligibility for the deduction under section 80P(2) of the I.T. Act. The Tribunal emphasized compliance with the activities of a primary agricultural credit society as per the Kerala Cooperative Societies Act, 1969. The appeals were allowed for statistical purposes, aligning with the Full Bench's ruling that the AO must independently assess eligibility, regardless of the registration certificate. The decision was pronounced on 14th September 2020.

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Issues:
Whether the CIT(A) was justified in confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act.

Analysis:
The appeals were filed by the assessee against the common order of the CIT(A) for the assessment years 2009-2010 and 2014-2015, challenging the denial of deduction u/s 80P(2)(a)(i) of the I.T.Act. The Assessing Officer disallowed the claim, stating that the assessee was essentially engaged in banking activities, making them ineligible for the deduction under section 80P(4) of the I.T.Act introduced from 01.04.2007. The CIT(A) upheld the disallowance, relying on the judgment of the Full Bench of the jurisdictional High Court. The assessee contended that they were a Primary Agricultural Credit Society, not a Primary Co-operative Bank, and challenged the CIT(A)'s decision before the Tribunal.

The Hon'ble jurisdictional High Court had previously held that if a certificate characterizing an assessee as a primary agricultural credit society is issued by the Registrar of Co-operative Societies, then the deduction u/s 80P(2) of the I.T.Act must be granted. However, a Full Bench of the High Court in a subsequent case reversed this finding, emphasizing that the Assessing Officer must conduct an inquiry into the activities of the assessee society to determine eligibility for the deduction. The Full Bench clarified that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Co-operative Society and must verify eligibility for each assessment year separately.

In the present case, the Assessing Officer concluded that the assessee's business was primarily banking, with only a small portion of loans being agricultural. The Tribunal noted that a detailed examination of each loan disbursement was necessary to determine whether they were for agricultural purposes. Considering the Full Bench's ruling, the Tribunal directed the Assessing Officer to reexamine the nature of each loan disbursement and decide on the eligibility for the deduction u/s 80P(2) of the I.T.Act based on compliance with the activities of a primary agricultural credit society under the Kerala Cooperative Societies Act, 1969. The issue was remanded back to the Assessing Officer for a fresh examination.

In conclusion, the appeals filed by the assessee were allowed for statistical purposes, and the Tribunal's decision was pronounced on 14th September 2020.

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