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Facts
The appellant, a primary agricultural credit co-operative society, claimed a Section 80P deduction for AY 2014-15, declaring Nil income. The Assessing Officer denied the deduction, treating the appellant as a co-operative bank, which was upheld by the CIT(A).
Held
Following the Supreme Court's decision in Mavilayi Service Co-operative Bank Ltd. v. CIT, the Tribunal ruled that Section 80P is a benevolent provision to be interpreted liberally and that the appellant is entitled to the deduction. The Tribunal directed the AO to allow the Section 80P deduction to the appellant society.
Key Issues
Whether a primary agricultural credit co-operative society is entitled to the deduction under Section 80P of the Income Tax Act, 1961, when the Revenue classified it as a co-operative bank and denied the deduction.
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 PRAKASH CHAND YADAV, JM
Assessment Year: 2014-15 Mangode Service Co-op. Bank Ltd. .......... Appellant Mangode Post, Cherplachery, Palakkad 679503 [PAN: AABAT2649E] vs. The Income Tax Officer, Ward-3, Palakkad .......... Respondent Appellant by: Shri Suresh Kumar C., CA Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 19.05.2025 Date of Pronouncement: 22.05.2025 O R D E R Per: Inturi Rama Rao, AM This appeal filed by the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 31.07.2023 for Assessment Year (AY) 2014-15.
Brief facts of the case are that the appellant is a co-operative society registered under the Kerala State Co-operative Societies Act, 1969. It is classified as a primary agricultural credit co-operative society. It is engaged in providing credit facilities to its members . The return of income for AY 2014-15 was filed on 23.12.2014 Mangode Service Co-op. Bank Ltd. disclosing Nil income after claiming deduction u/s. 80P of the Income Tax Act, 1961 (the Act) of Rs. 46,98,653/-. Against the said return of income, the assessment was completed by the Income Tax Officer, Ward-3, Palakkad (hereinafter called "the AO") vide order dated 21.12.2017 passed u/s. 143(3) of the Act at a total income of Rs. 52,44,240/-. While doing so, the AO had denied deduction u/s. 80P by holding that the appellant is not a primary agricultural credit co-operative society but a co-operative bank. Accordingly denied exemption u/s. 80P of the Act.
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 us in the present appeal.
We have heard the rival contentions and perused the material available on record. The learned Sr. DR fairly conceded that the issue is covered in favour of the appellant society by the law laid down by the Hon'ble Supreme Court in the case Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC). The relevant part of the judgement is extracted as below: - “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 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 Mangode Service Co-op. Bank Ltd. 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.”
In view of the above admitted position we direct the AO to allow deduction u/s. 80P as claimed by the appellant society.
In the result, the appeal filed by the assessee stands allowed.
Order pronounced in the open court on 22nd May, 2025.