INCOME TAX ACT, 1961

Section 80P(2)(a)(i)

Deduction under section 80P - Co-operative society - AO failed to examine details of loans disbursed by assessee -

Assessee was a co-operative society registered under the Kerala Co-operative Societies Act, 1969. AO denied the assessee's claim deduction under section 80P(2)(a)(i) for the reason that the assessee was essentially doing business of banking and disbursement of agricultural loans by the assessee was only minuscule. Therefore, the AO concluded that the assessee could not be treated as a co-operative society. Further, CIT (A) upheld the order of the AO. Held: It was found that AO after perusing narration of loan extracts in statutory audit report of assessee, came to the conclusion that out of the total loan disbursement, only a minuscule portion was advanced for agricultural purposes. However, the narration in loan extracts in the audit reports by itself might not conclusive to prove whether loan was an agricultural loan or a non-agricultural loan. In view of High Court decision in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (2019) 414 ITR 67 (Ker-HC) there should be fresh examination by AO as regards the nature of each loan disbursement and purpose for which it was disbursed, i.e., whether for agricultural purpose or not. Accordingly, the matter was remanded to the AO. Further, the AO should list out the instances where loans were disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee's activities were 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 under section 80P(2)(a)(i).

Followed:The Mavilayi Service Co-operative Bank Ltd. v. CIT (2019) 414 ITR 67 (Ker-HC)

REFERRED :

FAVOUR : Matter remanded

A.Y. :

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