ITO v. Nannambra Service Cooperative Bank Ltd.

Decision:    In assessee’s favour.

Deduction under section 80P(2)–Allowability–Primary agricultural credit society

Facts:

Assessee, a primary agricultural credit society registered under Kerala Co-operative Societies Act, 1969 claimed deduction under section 80P(2). AO denied the claim of deduction holding that assessee would not be considered as primary agricultural credit society as it was engaged in the business of banking and only negligible percentage of loans was disbursed for agricultural purposes.

Held:

Reserve Bank of India had given letters to societies similar to assessee stating that they were Primary Agricultural Credit Societies and, therefore, in terms of section 3 of the Banking Regulation Act societies were not entitled for banking license. Hence, assessee could not be considered as bank and was not entitled for deduction under section 80P.

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