No 242 Rameshwara Kudumangalore Vividoddesha Prathamika Krishi Grameen SSN Vs ITO (ITAT Bangalore)
Bangalore ITAT Restores Section 80P Claim of Agricultural Credit Co-operative Society; Holds AO Must Examine Nature of Activities and Member Deposits Before Denying Deduction
The Bangalore ITAT partly allowed the appeals of an agricultural credit co-operative society for AYs 2015-16 and 2020-21, holding that the Revenue had denied deduction under section 80P without properly examining the assessee’s activities or recording sustainable reasons. The Tribunal observed that where a society is engaged in providing credit facilities exclusively to its members, the deduction under section 80P(2)(a)(i) cannot be denied merely on assumptions or by mischaracterising its activities.
For AY 2015-16, the Tribunal deleted the disallowance of ₹10.13 lakh under section 80P(2)(a)(i), noting that neither the assessment order nor the appellate order contained any discussion or reasoning for denying the claim, and that the issue had not even formed part of the revision proceedings under section 263. It further allowed deduction on interest income from investments, holding that such income, being attributable to the business of providing credit facilities to members, qualified for deduction under section 80P(2)(a)(i) in the light of the Karnataka High Court decisions in Tumkur Merchants Souharda Credit Co-operative Ltd. and Pr. CIT v. Totagars Co-operative Sale Society. The Tribunal also directed the Assessing Officer to allow the deduction under section 80P(2)(c), while restoring the issues relating to provision for audit fees and leave encashment to the Assessing Officer for verification of supporting evidence and compliance with section 43B.
For AY 2020-21, the Tribunal found that the Assessing Officer had denied deduction under section 80P and made substantial additions towards member deposits and interest thereon without properly appreciating the assessee’s status as an agricultural credit co-operative society or examining the details already furnished. It held that absence of PAN of every member, particularly village farmers who did not possess PAN, could not by itself justify treating member deposits as bogus, so long as the society maintained the Know Your Customer (KYC) particulars required under the Co-operative Societies Act and applicable regulatory guidelines. The Tribunal restored the matter to the Assessing Officer with directions to examine the society’s eligibility under section 80P(2)(a)(i) and verify compliance regarding member deposits before deciding the issues afresh.
Cases Discussed
