INCOME TAX ACT, 1961

Section 80P(2)

Deduction under section 80P(2) - Allowability - Allegation that assessee was essentially doing the business of banking -

Assessee is a co-operative society claimed deduction under section 80P. AO disallowed the claim of deduction under section 80P on the ground that assessee was essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 1-4-2007, assessee would not be entitled to deduction under section 80P. Held: 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 the light of the dictum laid down by High Court in the case of Mavilayi Service Co-operative Bank Ltd. v. CIT [(2019) 414 ITR 67 (Ker.) (FB) (HC)] : 2019 TaxPub(DT) 4909 (Ker-HC) there should be fresh examination by AO as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it was for agricultural purpose or not. AO shall list out the instances where loans have 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 before denying the claim of deduction under section 80P(2).

Followed:Mavilayi Service Co-Operative Bank Ltd. v. CIT [(2019) 414 ITR 67 (Ker.) (FB) (HC)] : 2019 TaxPub(DT) 4909 (Ker-HC)

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2014-15

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