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Facts
The assessee, a Primary Agricultural Co-operative Society, filed appeals against disallowances of deductions under Section 80P for income from credit facilities to non-members and disallowance of provision for gratuity under Section 40A(7). The Assessing Officer and CIT(A) had disallowed these claims, treating the society as engaged in banking business with non-members, and had computed income by adding back the gratuity provision.
Held
The Tribunal condoned the delay in filing appeals. It held that the assessee is eligible for deduction under Section 80P(2)(a)(i) and 80P(2)(a)(iv) of the Act, but only to the extent of income earned from facilities extended to its members, relying on the Supreme Court's decision in *Mavilayi Service Co-operative Bank Ltd.* The matter was remanded to the AO to verify member-only credit facilities and allow the deduction accordingly. The disallowance of provision for gratuity under Section 40A(7) was upheld as the assessee did not press this ground.
Key Issues
1. Eligibility of Section 80P deduction for a Primary Agricultural Co-operative Society providing credit facilities to non-members. 2. Whether the provision for gratuity is allowable as a deduction under Section 40A(7) of the Income Tax Act.
Sections Cited
250, 143(3), 80P, 80P(2)(a)(i), 80P(2)(a)(iv), 80P(2)(d), 40A(7), 270A, 80P(4), 251, 143(2), 288A, 617, 22, 80HH, 80HHA, 80HHB, 80HHC, 80HHD, 80-I, 80-IA, 80-J, 80-JJ
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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: SHRI SONJOY SARMA & SHRI RAKESH MISHRA
order
: March 18th, 2025 ORDER
PER RAKESH MISHRA, ACCOUNTANT MEMBER:
The captioned appeals filed by the assessee are against separate orders of the Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as “the Ld. CIT(A)”] passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for AY 2015-16 & 2017-18 respectively dated 09.06.2023, which have been passed Page 2 of 17 Page 4 of 17 Page 5 of 17 Page 9 of 17 The above income (Excluding Rs. 3,00,000.00) Rs. 18,12,400.00 is normal Business Income of assessee, as the assessee has engaged in business of Fertilizers, seeds and providing credit to member and Banking activities by maintaining all rules and regulations as mentioned in Co-operative Society's Bye-laws. Hence whole income of the assessee society should be allowed as deduction as per the Section 80P(2)(a)(i) and 80P(2)(iv) of the Income Tax act 1961. The sentence "Carrying on business of banking or providing credit facilities to its members " the whole of the amount of profit and gains from such business is clearly allowed as deduction under section 80P(2)(a)(i) of the Income Tax act 1961.The word "business of banking" covers everything i.e. member as well as non-member. The credit facilities in terms of KCC loan etc. provided to members only. Therefore, the assessee is eligible for claiming deduction u/s 80P(2)(a)(i) and 80P(2)(a)(iv). Being aggrieved the assessee lodges this appeal on grounds herein after mentioned.”