TMI Blog2019 (5) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... bound by the registration certificate issued by the Registrar of Kerala Cooperative Society classifying the assessee-society as a cooperative society. The Hon ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years Thus the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether their activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. Interest on the investments with Cooperative Banks and other Bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80P of the I.T.Act, treated the assessee as a co-operative bank and not a co-operative society. Further the interest received from the investments were denied deduction u/s 80P of the I.T.Act by treating the same as income from `other sources . 4. Aggrieved by the orders of the assessment, the assessee filed appeal before the first appellate authority. The CIT(A) by following the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (384 ITR 490) allowed the claim of deduction u/s 80P of the I.T.Act. As regards interest received on investments, the CIT(A) held that the same should be assessed as `income from business since these investments were made in the course of busi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed. (iii) Ld. CIT(A) ought to have considered the judgement of Hon'ble Supreme Court in the case of Citizen Co-operative society Ltd Vs ACIT, Circle-9(1), Hyderabad dated 08.08.2017 reported in 397 ITR l(SC), wherein it has been held that if a cooperative society is violating the principle of mutuality in the grab of persons who actually are not real members and indulging in banking business per se that it cannot claim the benefit of section 80P(2)(a)(i). (iv) The Ld. CIT(A) ought to have considered the following case laws: (a) 203 ITR 1027 (SC) in the case of Sabargantha Zilla Kharid Vechar Sangh Ltd. (b) 363 ITR 68 (Kerala) in the case of Perunthalmanna Service Corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned DR placed reliance on the latest judgment of the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [ITA No.97/2016 order dated 19th March, 2019] . The learned AR relied on the orders of the CIT(A). 7. We have heard the rival submissions and perused the material on record. The Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. (supra) held that the Assessing Officer has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. It was held by the Hon ble High Court that the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 to be fixed by the Registrar of Co-operative Societies under the KCS Act and having its area of operation confined to a Village, Panchayat or a Municipality and as such, they are entitled for the benefit of sub-section (4) of Section 80P of the IT Act to ease themselves out from the coverage of Section 80P and that, the authorities under the IT Act cannot probe into any issues or such matters relating to such societies and that, Primary Agricultural Credit Societies registered as such under the KCS Act and classified so, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years. 7.1 In view of the dictum laid down by the Full Bench of the Hon ble High Court, the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether their activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. 8. As regards the interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited (supra) held that interest income earned from investments with treasur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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