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Facts
The appellant, a co-operative society, claimed a deduction under Section 80P of the Income Tax Act, 1961, for AY 2013-14, which was disallowed by the Assessing Officer (AO) during assessment under Section 143(3). The Commissioner of Income Tax (Appeals) confirmed the AO's action, leading to the present appeal before the Tribunal.
Held
Following the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, the Tribunal held that the assessee, being a primary agricultural credit co-operative society, is entitled to the deduction under Section 80P(2)(a)(i) of the Income Tax Act. The Tribunal emphasized a liberal interpretation of Section 80P as a benevolent provision, noting that Section 80P(4) specifically excludes co-operative banks involved in banking business with the public, which did not apply to the assessee.
Key Issues
Whether a primary agricultural credit co-operative society is entitled to deduction under Section 80P of the Income Tax Act, 1961, especially in light of the Supreme Court's interpretation regarding the scope and applicability of Section 80P(2)(a)(i) and Section 80P(4).
Sections Cited
80P, 143(3), 80P(2)(a)(i), 80P(4)
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Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI INTURI RAMA RAO, AM & SHRI SONJOY SARMA, JM
O R D E R Per: Inturi Rama Rao, AM These appeals filed by the assessee are directed against different orders of the National Faceless Appeal Centre, Delhi [CIT(A)] dated 29.03.2025 for Assessment Years (AY) 2013-14 and 2017-18.
Since identical issues and facts are involved in these appeals, they are heard together and disposed of by this common order.
& 352/Coch/2025 Kalikavu Service Co-op. Bank Ltd.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. The return of income for AY 2013-14 was filed on 31.03.2015 declaring Nil income after claiming deduction u/s. 80P of the Income Tax Act, 1961 (the Act) of Rs. 34,70,728/-. Against the said return of income, the assessment was completed by the ITO, Ward 2, Tirur (hereinafter called "the AO") vide order dated 03.02.2016 passed u/s. 143(3) of the Act at a total income of Rs. 59,20,233/-. While doing so, the AO made addition u/s. 80P of the Act of Rs. 77,35,765/-
Being aggrieved, an appeal was filed before the CIT(A), who vide the impugned order confirmed the action of the AO.
Being aggrieved, the appellant is in appeal before this Tribunal in the present appeal.
We have heard the rival contentions and perused the material 7. available on record. Since the appellant is a co-operative society classified as primary agricultural credit co-operative society, the appellant is entitled for deduction in respect of profits derived from business u/s. 80P of the Act, this issue is no longer res integra, as it is covered by the judgement of the Hon'ble Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC) wherein it was held as under: - “To sum up, therefore, the ratio decidendi of Citizen Co-operative Society Ltd. (supra), must be given effect to. Section 80P of the Income- tax Act, being a benevolent provision enacted by Parliament to encourage and pro- mote the credit of the co-operative sector in general & 352/Coch/2025 Kalikavu Service Co-op. Bank Ltd. must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word "agriculture" into section 80P(2)(a) (i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business, i.e., engaged in lending money to members of the public, which have a licence in this behalf from the RBI. Judged by this touchstone, it is clear that the impugned Full Bench judgment is wholly incorrect in its reading of Citizen Co-operative Society Ltd. (supra). Clearly, therefore, once section 80P(4) is out of harm's way, all the assessees in the present case are entitled to the benefit of the deduction contained in section 80P(2)(a) (i), notwithstanding that they may also be giving loans to their members which are not related to agriculture, Also, in case it is found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted.”
Respectfully following the above decisions of the Hon'ble Supreme Court, we hold that the assessee is entitled for deduction under sections 80P(2)(a)(i) of the Act.
In the result, the appeals filed by the assessee stand allowed.
Order pronounced in the open court on 25th June, 2025.