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TMI Blog2019 (12) TMI 767X X X X Extracts X X X X X X X X Extracts X X X X ..... e reasoning of the Assessing Officer to disallow the claim of deduction u/s 80P(2) of the I.T.Act was that the assessee was doing the business of banking, and therefore, in view of insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007, the assessee will not be entitled to the deduction u/s 80P(2) of the I.T.Act. The Assessing Officer also disallowed the claim of deduction with regard to interest income received by the assessee on investments made with District Co-operative Banks. 3. Aggrieved by the order of assessment denying the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred an appeal to the first appellate authority. The CIT(A) allowed the appeal by holding that the assessee was eligible for deduction u/s 80P of the I.T.Act. The interest income received from other banks and treasury also was allowed as deduction u/s 80P(2)(a)(i) of the I.T.Act. In allowing the appeal of the assessee, the CIT(A) followed the judgment of the Hon'ble jurisdictional High Court in the case of Chirakkal Service Cooperative Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.). 4. Subsequently, the CIT(A) issued notice u/s 154 of the I.T.Act proposing to re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le and illegal. C. It is submitted that the powers under Section 154 of the Act can be invoked by the authority only when there is mistake apparent from record. The original appellate order was passed by the respondent on 5-3-2019, on which date the law governing the field is the dictum laid down in Chirakkal Service Co-operative Bank Ltd. (supra). Therefore, the rectification order was passed by the appellate authority correctly applying the law and there is absolutely no mistake apparent from records as on the date of passing the order. D. It is submitted that the judgment in Mavilayi Service Cooperative Bank Ltd., v. Commissioner of Income Tax was rendered by this Hon'ble Court on 19-3-2019, apparently after 5-3-2019 on which date Commissioner, Income Tax (Appeals) had passed the appellate Order Therefore, instead of invoking the provisions under Section 154 of the Act, the matter should have been taken in appeal. E. It is submitted that the Hon'ble Supreme Court in the judgment Mepco Industries Ltd., Madurai v. Commissioner of Income Ta:. and another (SLP No. 9979/2008)had elaborately considered the seep of Section 154 of the Income Tax Act, and also considered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Bank Ltd. v. CIT (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 Officer is not bound by the registration certificate issued by the Registrar of Kerala Co-operative Society classifying the assessee-society as a co-operative 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. The finding of the Larger Bench of the Hon'ble High Court reads as follows:- "33. In view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1] it cannot be contended that, while considering the claim made by an assessee society for deduction under Section 80P of the IT Act, after the introduction of sub-section (4) thereof, the Assessing Officer has to extend the benefits available, merely looking at the class of the society as per the certificate of registration issued under the Central or State Co-operative Societies Act and the Rules made thereunde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s' case (supra), since each assessment year is a separate unit, the intention of the legislature is in no manner defeated by not allowing deduction under Section 80P of the IT Act, by reason of sub-section (4) thereof, if the assessee society ceases to be the specified class of societies for which the deduction is provided, even if it was eligible in the initial years." 7.1 The CIT(A) had initially allowed the appeal of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed order u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied, by relying on the 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 (supra). The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibili ..... X X X X Extracts X X X X X X X X Extracts X X X X
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