2016 (7) TMI 1518 - AT - Income Tax

Denying the deduction u/s 80P(2) - claim of deduction u/s 80P (2) was denied by the AO for the reason that the assessee is primarily engaged in the business of banking and in view of section 80P(4) of the Act the assessee is not entitled to deduction u/s 80P(2) - HELD THAT - The Hon ble jurisdictional High Court in the case of The Chirakkal Service Cooperative Bank Ltd others 2016 (4) TMI 826 - KERALA HIGH COURT has held that the primary agricultural credit society registered under the Kerala Cooperative Societies Act 1969 is entitled to the benefit of deduction u/s 80P(2). The primary agricultural credit societies registered as such under the KCS Act; and classified so under that Act including the appellants are entitled to such exemption - Decided in favour of assessee

Summary

Issues:
- Denial of deduction u/s 80P(2) of the Act by the AO and confirmation by CIT(A).
- Whether primary agricultural credit societies are entitled to the benefit of deduction u/s 80P(2) of the Act.

Analysis:
1. The judgment involves seven appeals by different assessees challenging the denial of deduction u/s 80P(2) of the Act by the AO and confirmation by CIT(A). The appeals were heard together due to a common issue.

2. The primary issue in all appeals was whether the CIT(A) was justified in confirming the denial of deduction u/s 80P(2) of the Act. The AO had denied the deduction, stating that the assessees were primarily engaged in banking activities, thus ineligible for the deduction.

3. In one specific case (ITA No. 191/Coch/2016), adjournment petitions were filed by the assessee, but as no sufficient cause was mentioned and no appearance was made during the hearing, the petitions were rejected, and the case was disposed of ex parte after hearing the ld DR.

4. The main contention raised by the assessees was that they were primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969, engaged in providing agricultural credit to members. The AO's denial of deduction u/s 80P(2) was based on the view that the assessees were primarily engaged in banking activities.

5. The assessees argued that a recent judgment by the Hon'ble Jurisdictional High Court favored their position. The High Court had ruled that primary agricultural credit societies are entitled to the benefit of deduction u/s 80P(2) of the Act.

6. The Hon'ble High Court's judgment emphasized that societies classified as primary agricultural credit societies under the Kerala Cooperative Societies Act are entitled to the deduction. The Court highlighted the statutory provisions and bye-laws supporting the classification of these societies as primary agricultural credit societies.

7. The High Court's findings were based on the specific classification of the assessees as primary agricultural credit societies under the Kerala Cooperative Societies Act, which entitled them to the exemption under section 80P of the IT Act. The Court held that the Tribunal erred in deciding against the assessees on this issue.

8. Considering the High Court's judgment and the classification of the assessees as primary agricultural credit societies, the ITAT allowed the appeals of all the assessees, granting them the benefit of deduction u/s 80P(2) of the Act. The orders were pronounced in favor of the assessees on July 19, 2016.