Avinissery Service Co-operative Bank Ltd Vs Income Tax Department (ITAT Cochin)
In Avinissery Service Co-operative Bank Ltd vs Income Tax Department ITAT Cochin, the assessee, a primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969, challenged the denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 for Assessment Year 2016–17. The Assessing Officer had restricted the claimed deduction and made an addition of ₹1.63 crore, primarily on the ground that the assessee had granted loans for non-agricultural purposes and therefore was not eligible for deduction, also invoking Section 80P(4). The CIT(A) upheld the disallowance.
The Tribunal first condoned a delay of approximately eight months in filing the appeal, accepting the assessee’s explanation that it believed the impugned order to be a draft and awaited a final order. On merits, the Tribunal examined whether a primary agricultural credit society could be denied deduction under Section 80P(2)(a)(i) due to lending for non-agricultural purposes.
Relying on the Supreme Court judgment in Mavilayi Service Co-operative Bank Ltd., the Tribunal held that Section 80P(4) operates as a proviso excluding only co-operative banks engaged in banking business with an RBI licence. It observed that a primary agricultural credit society, not being a co-operative bank, is entitled to deduction if it provides credit facilities to its members. The Tribunal further noted that the expression “providing credit facilities to its members” is not limited to agricultural loans and includes loans for non-agricultural purposes. It also accepted that nominal members qualify as members under the Kerala Co-operative Societies Act, and loans to them are eligible for deduction.
