INCOME TAX ACT, 1961

Section 80P

Deduction under section 80P - Allowability - Assessee's activities whether in compliance with activities of primary agricultural credit society functioning under Kerala Co-operative Societies Act, 1969 -

Assessee was a co-operative society registered under Kerala Co-operative Societies Act, 1969. It claimed deduction under section 80P but same stood denied by AO on allegation that assessee was essentially doing business of banking and disbursement of agricultural loans by assessee was only minuscule. AO held that assessee could not be treated as co-operative society. Held: Narration in loan extracts in the audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, AO had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it was for agricultural purpose or non-agricultural purpose. In this case, such a detailed examination was not conducted by AO. Thus, AO was directed to list out the instances where loans were disbursed for non-agricultural purposes, etc. and accordingly conclude that assessee's activities were not in compliance with the activities of primary agricultural credit society functioning under Kerala Co-operative Societies Act, 1969, before denying the claim of deduction under section 80P(2).