Primary agricultural co-op credit societies entitled to S.80P deduction for credit to members including associates, not barred by S.80P(4) absent RBI license.

ORDER

PER S.R. RAGHUNATHA, ACCOUNTANT MEMBER:

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeal), Addl/JCIT (A), Agra dated 30.12.2024 for the assessment year 2017-18.

2. The assessee has raised the following grounds of appeal:-

1. The CIT(A) erred in confirming the denial of the claim of deduction of Rs.15,91,774/ - under sec.80P(2) of the Act to the assessee.

2. The CIT(A) failed to appreciate that the assessee is a Primary Agricultural cooperative credit society, registered under the Tamilnadu Cooperative Societies Act, 1983 and fu11y satisfies the statutory requirements of providing credit facilities to its members and hence the denial of the claim of deduction is unjust, arbitrary, based on surmises and conjectures.

3. The CIT(A) further failed to appreciate that the case of assessee is stands covered by the Supreme Court decision in the case of M/s.The Mavilayi Service Cooperative bank Ltd. and the assessee having satisfied the parameters laid down, the benefit of deduction u/s.80P(2) is to be allowed to the assessee.

4. The CIT(A) further failed to appreciate that Sec.2(16) of the T.N. Co-operative Societies Act states that a Member includes an Associate Member and hence confirming the denial of deduction on this ground is wholly unjustified.

5. The CIT(A) failed to appreciate that the decision of Citizen Co-op. Society Ltd. is no longer good law, considering the judgement of M/s.The Mavilayi Service Co-op. Bank case and denying the claim of the deduction and hence merely following the decision of Citizen Co- op. Society, which does not apply to the facts herein is unjust and untenable in law,.

6. The CIT(A) further failed to appreciate that considering the provisions of sec.2(16) of the Parent legislation and the Supreme Court decision in Mavilayi Co-op. Bank case, the assessee satisfies the principles of mutuality and hence is entitled to the benefit u/s.80P(2) of the Act.

7. The CIT(A), in any event, ought to have considered the contentions of assessee in the proper perspective and allowed the claim of deduction u/s.80P(2) of the Act and thus accepted the Nil income returned by assessee.

3. The brief facts of the case are that the assessee is Primary Agricultural Co-Op. Society registered under the Tamil Nadu Co Operative Societies Act 1983. The assessee filed its return of Income for the A.Y. 2017-18 on 07.11.2017 admitting Nil Total Income after claiming deduction u/s.80P(2)(a), (c) and (d) to the tune of Rs.15,97,774/-. The return of income was processed u/s. 143(1) of the Act. Subsequently the case was selected for scrutiny under CASS and statutory notices were issued. The society is providing credit facilities to its regular members (A Class members) and also to Associate members or Nominal members (B class members). Therefore, the AO concluded that the principle of mutuality do not apply, since the assessee is carried on business with other than members i.e. nominal members and the deduction u/s.80P has been denied relying on the decision of Hon’ble Supreme court in the case M/s.Citizen co-op. Society ltd.

4. Further, the AO also denied the deduction u/s.80P(4) of the Act stating the assessee has advanced loan which includes jewel loans, deposit loans, consumer loans, short term loans, housing loans etc, which is carrying on the exclusive activities in connection with the agricultural activities by passing an order u/s. 143(3) dated 10.12.2019. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), NFAC.

5. The assessee reiterated the submissions and prayed for allowing the deductions claimed u/s.80P of the Act. However, the ld.CIT(A) confirmed the orde