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2015 (9) TMI 1422 - AT - Income TaxDisallowance for deduction u/s 80P(2)(a)(i) - Held that - The assessee is primarily involved giving loans to its members for the purposes of purchasing minor irrigation and agricultural equipments , rearing of the cattle s namely cows, buffalos goats and sheep. These are agricultural activities within the meaning of Act itself and further comes within the scope of agricultural and rural development activities. Thus giving the loans for the agriculture implements seeds, and live stock clearly entitle the assessee to avail the benefit of Section 80 P of the Act. Therefore we hold that Revenue was wrong in contending that the giving loan for livestock only i.e. cow, buffalo, goat and sheep is not agricultural activities and therefore the assessee is entitled to deduction under the above said provision. In the result thereof we hereby allow the appeal with the direction to the AO to give all the benefits to the assessee under 80P of the act. - Decided in favour of assessee
Issues Involved:
1. Whether the assessee is entitled to a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. 2. Whether the assessee qualifies as a "primary agricultural credit society" under Section 80P(4) of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Entitlement to Deduction under Section 80P(2)(a)(i) The primary contention of the assessee was that it provides financial assistance to its members for agricultural purposes or purposes connected with agricultural activities. The assessee argued that out of total loans of Rs. 925 lacs, Rs. 439.52 lacs were given for irrigation and agricultural equipment, and Rs. 411.56 lacs for rearing cows, buffaloes, goats, and sheep. The assessee claimed that rearing these animals is an agricultural activity within the meaning of Section 80P(4). The Revenue, however, argued that the activities of the assessee do not qualify under Section 80P(4) and thus, the assessee is not entitled to the deduction. The Tribunal had previously rejected the assessee's contention, emphasizing that the assessee's principal business was not providing financial accommodation for agricultural purposes as defined under the Banking Regulation Act, 1949. Upon review, the Tribunal noted that Section 80P provides deductions for co-operative societies engaged in activities such as banking, providing credit facilities, and other specified activities. The Tribunal highlighted that the amendment to Section 80P excludes co-operative banks but continues to allow deductions for primary agricultural credit societies and primary co-operative agricultural and rural development banks. Issue 2: Qualification as a "Primary Agricultural Credit Society" The Tribunal examined whether the assessee qualifies as a "primary agricultural credit society" under the Banking Regulation Act, 1949. The Tribunal observed that the assessee's principal business should be providing financial accommodation for agricultural purposes or activities connected with agriculture. The Tribunal noted that the assessee provided significant loans for irrigation, agricultural equipment, and rearing livestock, which are considered agricultural activities. The Tribunal referred to the Gujarat High Court's decision in CIT-II vs. Surat Vankar Sahkari Sangh Ltd., which clarified that Section 80P(4) does not apply to entities that are not co-operative banks. Therefore, the exclusion clause of Section 80P(4) would not apply to the assessee, which is a credit co-operative society and not a co-operative bank. The Tribunal concluded that the assessee's activities of providing loans for agricultural implements, seeds, and livestock qualify as agricultural and rural development activities. Therefore, the assessee is entitled to the deduction under Section 80P(2)(a)(i). Conclusion: The Tribunal allowed the appeal, directing the Assessing Officer to provide all the benefits to the assessee under Section 80P of the Income Tax Act. The Tribunal held that the assessee qualifies as a "primary agricultural credit society" and is entitled to the deduction under Section 80P(2)(a)(i) for providing financial accommodation for agricultural purposes and activities connected with agriculture. Order pronounced in the open court on 24/09/2015.
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