Co-operative society providing Credits for Agricultural Purposes can be classified as Primary Agricultural Credit Society: Kerala HC set aside Income Tax Assessment Rejecting Deduction u/s 80 P

In a significant case, the Kerala High Court held that a Co-operative society providing Credits for Agricultural Purposes can be classified as a Primary Agricultural Credit Society and set aside the Income Tax Assessment which rejected the claim of deduction under Section 80 P of the Income Tax Act, 1961.s

Malanad Service Co-operative Bank Ltd., the petitioner challenged the assessment of the income for the assessment year 2017-18 wherein the assessing authority rejected the claim of the petitioner for exemption of his income under Section  80P of the Income Tax Act, 1961 on the ground that the petitioner is carrying banking business without having relevant clearances and permissions from the Reserve Bank of India, and the petitioner is not a Primary Agricultural Credit Society as claimed by the petitioner.

Cooperative societies, excluding cottage industries, can claim additional deductions under section 80 P of the Income Tax Act, 1961 based on their profits and gains. Consumer Cooperative Societies engaged in activities other than those mentioned in points (a) to (k) and whose profits and gains are below Rs. 10,00,000, can enjoy deductions based on their income. For consumer cooperative societies or any other cooperative society in cases where their profits and gains exceed Rs. 10,00,000, they can still claim deductions of up to Rs. 50,000.

It was stated that the issue is covered in the judgement of the Supreme Court in the case of Mavilayi Service Co-operative Bank Ltd. v. Commissioner of Income Tax. Mr. Jose Joseph, standing Counsel for the Revenue fairly submitted that the assessing authority has not taken into consideration of the Supreme Court Judgment in  Mavilayi Service Co-operative Bank Ltd.

Considering the circumstance, the single judge bench of Justice Dinesh Kumar Singh set aside the assessment order and remanded the matter back to the assessing authority for fresh assessment after taking into consideration the Supreme Court Judgment in  Mavilayi Service Co-operative Bank Ltd. 

Further held that “After finalising the fresh assessment, if the petitioner is dissatisfied, he can avail the statutory remedy of appeal before the concerned authority.”

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