Kolkata ITAT Grants Benefits to Primary Agricultural Credit Societies Under Section 80P(2)(i) of the IT Act

Kolkata ITAT Grants Benefits To Primary Agricultural Credit Societies Under Section 80P(2)(i) Of The IT Act

The Kolkata Bench of the Income Tax Appellate Tribunal (ITAT) has ruled that primary agricultural credit societies are eligible for benefits under Section 80P(2)(i) of the Income Tax Act when offering credit facilities for non-agricultural purposes to their members.

The bench, comprising Rajpal Yadav (Vice President) and Manish Borad (Accountant Member), noted that the appellant society qualifies for a deduction under Section 80P(2)(i) of the Act. However, this deduction applies only to the income generated from the services provided to its members.

The appellant, a Primary Agricultural Credit Society (PACS), declared nil income in its income tax return after availing of the deduction under Section 80P of the Income Tax Act. The case underwent scrutiny under CASS, and the assessment order was subsequently issued. The Assessing Officer (AO) revoked the deduction claimed by the appellant society under Section 80P on the grounds that it is not exclusively a cooperative society for its members and has also extended credit facilities to non-members.

The AO further noted that the society had not demonstrated its primary objective of providing financial assistance to its members for agricultural purposes or activities related to agriculture. In the initial appeal, the Commissioner of Income Tax (Appeals) (CIT(A)) dismissed the society's appeal, aligning with the conclusions outlined in the assessment order and without addressing the arguments presented by the society during the appellate proceedings.

The appellant society argued that it is registered under the West Bengal Co-operative Societies Act, 2006, and operates as a PACS, primarily engaged in offering financial aid to its members for agricultural pursuits. As a PACS, it is eligible for deduction under Section 80P(4). The society provided details of the individuals who received credit facilities, refuting the assertion by lower authorities that it extended credit to non-members. Given its status as a PACS and its focus on providing credit facilities exclusively to members, the appellant society asserted its rightful claim to deduction under Section 80P and urged for its reinstatement.

The question at hand pertained to the eligibility of the assessee for deduction under Section 80P of the Act concerning the income derived from offering credit facilities to its members, profits generated from trading fertilizer sales, and income originating from other associated activities.

Section 80P(2)(i) of the Income Tax Act stipulates that if a cooperative society is involved in offering credit facilities to its members, the entire amount qualifies for deduction.

The tribunal observed that while the assessee furnished a list of individuals who received credit facilities, it did not adequately demonstrate to the AO's satisfaction that all these individuals were indeed its members. Additionally, the appellant society derives income from trading activities and other sources.

The ITAT ruled that the appellant society had not adequately demonstrated to the lower authorities whether the credit facilities provided were exclusively for its members and not for non-members. Consequently, the ITAT directed the appellant to submit the necessary details to the AO. The AO, was instructed to grant deductions under Section 80P(2)(i) to the appellant for the income earned from or through its members, following the provided directions. It was emphasized that the appellant should be afforded a reasonable and proper opportunity to present its case.