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TMI Blog2016 (11) TMI 1615X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in allowing deduction of Rs. 2,96,19,669/- under section 80P(2)(a)(i) of the Act in respect of the unexplained cash credit assessed u/s 68 of the Act. 3. The Ld. CIT (A) ought to have appreciated the fact that deemed income u/s 68 of the Income Tax Act cannot be treated as income from providing credit facilities to the members of the Society, as envisaged in section 80P(2)(a)(i) of the Income Tax Act. 4. The Ld. CIT (A) ought to have further appreciated that the order of the Kerala High Court in the case of The Chirakkal Service Co-operative Bank Ltd in ITA No.21 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I T Act. As regards the addition made u/s 68, the CIT held that since assessee could not furnish the full details of the deposit, the addition made by the Assessing Officer is justified. The CIT(A), however, with regard to the addition made u/s 68, held that deduction u/s 80P to the extent of enhanced income is eligible. 5 Aggrieved by the order of the CIT(A), the revenue is in appeal before us. The ld DR relied on the ground raised in the appeal memo. On the other hand, the ld counsel for the assessee reiterated the submissions made before the income tax authorities and supported the order of the CIT(A). 6 We have heard the rival submissions and perused the material on record.. The Hon'ble jurisdictional High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proved by the competent authority under such State law. This, we visualise as due reciprocative legislative exercise by the Parliament recognising the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act, it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes, the rate 'of interest on such loans and advances to be at the rate fixed by the Registrar of co-operative societies under the KCS Act and having its area of operation confined to a village, p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue regarding the entitlement of exemption under section 80P against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act; and classified so, under that Act, including the appellants are entitled to such exemption." 6.2 In the instant case, the assessee is a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969. The certificate, which has been issued by the Registrar of Cooperative Societies, to the above effect, is placed on record. The Hon'ble jurisdictional High Court had held that primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969 are entitled to the benefit of deduction u/s 80P(2)(i)(a) of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal: i) Buldana Urban Coop Credit Society Ltd vs ACIT - IT appeal nos 151 to 153 and 179 to 181(ITAT Nagpur) 0f 2012 ii) Karad Merchant Sah. Credit Sanstha vs ITO - ITA No. 159/PN/09 (AY2005-06) of ITAT Pune. 7.2 The CBDT, in the recent circular no.37/2016 dated 2nd Nov 2016 has considered higher deduction u/s 80P on the enhanced profit as a result of disallowance of expenditure. The CBDT had clarified that, as a result of expenditure disallowance, there is a enhanced profit and the same is brought to tax as business income, deduction under Chapter VI-A need to be allowed on the enhanced profit. 7.3 In light of the above reasoning, we hold that the CIT(A) is justified in granting benefit of deduction u/s 80P(2)(i)(a) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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