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Facts
The assessee, Vilavattam Service Co-op. Bank Ltd., claimed deduction under Section 80P of the Income Tax Act, 1961, which was disallowed by the Assessing Officer during assessment under Section 143(3). The AO and subsequently the CIT(A) rejected the claim, relying on the Kerala High Court's Mavilayi judgment, on the grounds that the assessee did not prove its registration as a co-operative society under the Kerala State Co-operative Societies Act, 1969, and did not fall under the category of a Primary Agricultural Credit Society.
Held
The Income Tax Appellate Tribunal (ITAT) observed that the assessee had placed on record a certificate from the Joint Registrar of Co-operative Societies, confirming its registration as a Primary Agricultural Credit Society. Since this certificate was not presented before the CIT(A), the Tribunal, in the interest of justice and equity, restored the matter to the file of the Assessing Officer. The AO is directed to reconsider the claim of deduction under Section 80P of the Act in light of the judgment of the Hon'ble Supreme Court in the case of Mavilayi Service Co-op. Bank Ltd.
Key Issues
Whether the assessee, a service co-operative bank, is eligible for deduction under Section 80P of the Income Tax Act, particularly whether it qualifies as a Primary Agricultural Credit Society as per the relevant Co-operative Societies Acts and Banking Regulation Act.
Sections Cited
250, 143(3), 80P, 80P(2)(a)(i), 80P(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, COCHIN BENCH
Before: SHRI GEORGE GEORGE K., VP & SHRI INTURI RAMA RAO, AM
Assessment Year: 2018-19 Vilavattam Service Co-op. Bank Ltd. .......... Appellant Kurichikkara P.O., Thrissur 680028 [PAN: AAAAV9819K] vs. The Income Tax Officer, Ward - 2(1), Thrissur .......... Respondent Appellant by: Shri Alan Priyadarshi Dev, Advocate Respondent by: Smt. Leena Lal, Sr. D.R. Date of Hearing: 02.04.2025 Date of Pronouncement: 03.04.2025 O R D E R Per: George George K., VP This appeal at the instance of the assessee is directed against the order of the National Faceless Appeal Centre, Delhi [CIT(A)], dated 23.08.2024 passed u/s. 250 of Income Tax Act, 1961 (hereinafter "the Act"). The relevant assessment year is 2018-19.
The solitary issue raised is whether the CIT(A) is justified in confirming the Assessing Officer’s action in rejecting the assessee’s claim of deduction u/s. 80P of the Act.
Vilavattam Service Co-op. Bank Ltd.
Brief facts of the case are that the assessment was completed u/s. 143(3) of the Act vide order dated 25.03.2021 disallowing the claim of deduction u/s. 80P of the Act. The AO rejected assessee’s claim of deduction u/s. 80P primarily relying on the Full Bench judgement of the Hon'ble Kerala High Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2019] 414 ITR 67 (Ker) (FB). The AO held that the assessee has not proved that it is registered as a co-operative society under the Kerala State Co- operative Societies Act, 1969.
Aggrieved by the denial of claim for deduction u/s. 80P of the Act the assessee society filed appeal before the first appellate authority. The CIT(A) confirmed the view of the AO in denying the claim of deduction u/s. 80P of the Act. The relevant finding of the CIT(A) reads as follows: -
“8.1 Taxpayer submits that they are a Primary Agricultural Credit Society registered as per the Rule 15(1)(a)(3)(a) of Kerala Co-operative Societies Rules 1969 and are primarily engaged in providing credit facilities to members of the society and not to the general public, and all the services carried out by them are as per the bye-law are in compliance with the Kerala Co-operative Societies Act 1969 (KCS Act). This information is subject to verification. There cannot be a difference between KCS Rules and KCS Act. As per section 80P(4) there is restriction as far as claim under section 80P(2)(a)(i) is concerned. If a cooperative bank is a "Primary Agricultural Credit Society" or a "Primary Cooperative Agricultural and Rural Development Bank" (having its area of activity confined to a taluk) it is eligible for claim of deduction Vilavattam Service Co-op. Bank Ltd. u/s 80P(2)(a)(i). As per Kerala Cooperative Socities Act Farmers Cooperative Society, Service Cooperative Society falls under the definition of Primary agricultural credit society. The taxpayer has not been able to demonstrate convincingly the they fall under the definition of Primary Agricultural Credit Society in concept and practise. The honorable Supreme Court while rendering the judgment in the case of Mavilayi has opined that Section 80P of the Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of us. 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) of the Act when it is not there. Further, section 80P(4) of the Act 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 license in this behalf from the RBI. The argument of the taxpayer that it falls under Primary Agricultural Credit Society needs a closer look. The definition of Cooperative Bank as per BR Act is given below - Section 5(i)(cci)"Co-operative bank" means a state co- operative bank, a central co-operative bank and a primary co- operative bank; Section 5(i)(ccv) "primary co-operative bank" means a cooperative society, other than a primary agricultural credit society, the primary object or principal business of which is the transaction of banking business; 8.2 The taxpayer VILAVATTOM SERVICE COOPERATIVE BANK is a service cooperative bank which do not fall under the definition of Cooperative Bank as far as B R Act is concerned. Under BR Act there are only four entities recognised as Vilavattam Service Co-op. Bank Ltd. cooperative banks -STATE COOPERATIVE BANK, CENTRAL COOPERATIVE BANK, PRIMARY COOPERATIVE BANK, COOPERATIVE SOCIETY other than a Primary Agricultural Credit Society. So our taxpayer do not fall under the category of PRIMARY AGRICUTLURAL CREDIT SOCIETY for claiming the benefit of section 80P. Considering the discussion above the claim of the assessee under section 80P stands negated. The addition of Rs. 5,00,18,293/- is upheld.”
Aggrieved by the order of the CIT(A) the assessee society has filed the present appeal before the Tribunal. The learned A.R. has placed on record a certificate from the Joint Registrar of Co- operative Societies stating therein that the assessee is registered as a Primary Agricultural Credit Society and not a co-operative bank. The learned A.R. submitted that the assessee had not placed on record the aforesaid certificate before the CIT(A). Therefore, it is prayed that in the interest of justice and equity the matter may be restored to the file of the AO to consider the claim of deduction u/s. 80P of the Act in light of the judgement of the hon'ble apex court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 431 ITR 1 (SC).
On the other hand, the learned Sr. DR supported the orders of the AO and the CIT(A).
We have heard the rival contentions of both the parties and perused the material available on record. The assessee has placed on record a certificate of the Joint Registrar of Co-operative Societies stating therein that the assessee is registered as a primary Vilavattam Service Co-op. Bank Ltd. agricultural credit society. In light of the certificate now placed on record, in the interest of justice and equity, we restore the matter to the file of the AO. The AO is directed to reconsider the claim of deduction u/s. 80P of the Act in light of the judgement of the Hon'ble Supreme Court in the case of Mavilayi Service Co-op. Bank Ltd. (supra). It is ordered accordingly.
In the result, the appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on 3rd April, 2025.