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2020 (3) TMI 597 - AT - Income TaxDeduction u/s 80P(2)(a)(i) denied - A.O. allowed deduction u/s 80P only proportionately to the extent of agricultural loan disbursed by the assessee - assessee will not be entitled to deduction u/s 80P in respect of disbursement of non-agricultural loan - HELD THAT:- In the instant case, AO had denied a portion of claim of deduction u/s 80P for the reason that assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule. AO concluded to the extent of the disbursement of agricultural loan alone, assessee is entitled to deduction u/s 80P(2) - AO after perusing the narration of the loan extracts for the financial period 2009-2010 and 2013-2014, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In these cases, such a detailed examination has not been conducted by the A.O. A.O. has not examined to what extent loans, if any, has been disbursed to non-members. There is a passing statement of the assessment order that there has been disbursement of non-agricultural loans to non-members as well. There has been no detailed examination of these aspects by the A.O. At the time of assessment, the judgment of Chirakkal Service Cooperative Bank Ltd. [2016 (4) TMI 826 - KERALA HIGH COURT] was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessee as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P. Therefore, in view of the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra), we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. The A.O. shall list out the instances where loans have disbursed to non-members of assessee-society, for non-agricultural purposes etc. and accordingly conclude that the assessee’s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2).
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