Savanoor Primary Agricultural Co-operative Society Ltd. (ITAT Bangalore)
Introduction: The recent decision by the Income Tax Appellate Tribunal (ITAT) Bangalore regarding the case of Savanoor Primary Agricultural Co-operative Society Ltd. involves the re-adjudication of a deduction under Section 80P(2)(e) of the Income Tax Act. This article provides an in-depth analysis of the tribunal’s order, examining the issues raised, arguments presented, and the implications of the decision.
Detailed Analysis:
Savanoor Primary Agricultural Co-operative Society Ltd., a registered co-operative society under the Karnataka State Cooperative Societies Act, filed an appeal against the CIT(A)’s order concerning the denial of a deduction under Section 80P of the Income Tax Act for the assessment year 2018-19.
The tribunal’s decision primarily focuses on several issues raised by the assessee regarding different sections of Section 80P:
1. Section 80P(2)(a)(i) and 80P(2)(d) Deduction: The tribunal upheld the CIT(A)’s decision to deny deduction under these sections concerning interest and dividend income earned from co-operative banks and investments. The tribunal referred to relevant judicial precedents and directives, supporting the denial of deduction.
2. Section 80P(2)(a)(iii) Deduction: The tribunal directed re-examination of the deduction claimed by the assessee for commission income earned from marketing agricultural produce. The lack of necessary documentation and incorrect claim under this section necessitated a fresh examination by the assessing officer.
3. Section 80P(2)(e) Deduction: The tribunal also ordered re-adjudication of the deduction claimed by the assessee under this section for income earned from letting of godowns for storage of agricultural produce against loans provided. The tribunal noted that full details were not available before the assessing officer, warranting a fresh examination of the claim.
Conclusion: The ITAT Bangalore’s decision highlights the importance of proper documentation and accurate classification of income for claiming deductions under Section 80P of the Income Tax Act. While some claims were upheld or partially allowed, others required re-adjudication due to incomplete information or misclassification. This case underscores the significance of thorough compliance with tax laws and the need for clear evidence to support deduction claims.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal at the instance of the assessee is directed against CIT(A)’s order dated 22.09.2023, passed under section 250 of the Income Tax Act, 1961 (hereinafter called ‘the Act’). The relevant Assessment Year is 2018-19.
2. Brief facts of the case are as follows:
Assessee is a co-operative society registered under the Karnataka State Cooperative Societies Act, 1959. It is engaged in the business of providing credit facilities to its members. For the Assessment Year 2018-19, the return of income was filed on 14.10.2018 declaring Nil income after claiming deduction of Rs.81,61,682/- under section 80P of the Act. The assessment was selected for scrutiny and notice under section 143(2) of the Act was issued on 20.09.20 19. The assessment was completed under section 143(3) r.w.s. 143(3A) and 143(3B) of the Act vide order dated 25.02.2018. In the said Assessment Order, claim of deduction under section 80P was denied and the total income was determined at Rs.81,61,689/- as against the Nil income declared by the assessee society.
3. Aggrieved by the Assessment Order, assessee preferred appeal before the First Appellate Authority (FAA). The CIT(A) partly allowed the appeal of the The CIT(A) directed the AO to verify the extent of credit facilities provided to non-members and deny the deduction under section 80P of the Act to that extent. As regards claim of deduction under sections 80P(2)(a)(iii) and 80P(2)(d) / 80P(2)(e) of the Act, the CIT(A) confirmed the view taken by the AO. The CIT(A) held that assessee is not entitled to deduction under section 80P(2)(d) or under section 80P(2)(a)(i) of the Act w.r.t. interest / dividend received on investments with co-operative banks. However, the CIT(A) allowed the alternative claim of the assessee and directed the AO to allow cost of funds for earning the interest income which is to be assessed under the head “Income from Other Sources” under section 56 of the Act.
4. Aggrieved by the Order of the CIT(A), assessee has filed the present appeal before the Tribunal. Assessee has filed two sets of Paper Books enclosing therein case laws relied on, calculation of cost of funds, bye-laws of the assessee society, submissions made before the CIT(A), etc. The learned AR reiterated the submissions made before the AO and the CIT(A).
5. Learned DR, on the other hand, supported the findings of the CIT(A).
6. We have heard the rival submissions and perused the material on record. Assessee’s claim of deduction under section 80P of the Act are detailed below:
