TMI Blog2020 (1) TMI 957X X X X Extracts X X X X X X X X Extracts X X X X ..... activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. 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 [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that interest income earned from investments with treasuries and banks is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business instead of `income from other sources . However, as regards the grant of deduction u/s 80P on such interest income, the Assessing Officer shall follow the law laid down in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly. - ITA Nos.706 to 710/Coch/2019 - - - Dated:- 21-1-2020 - Shri George George K, Judicial Member For the Appellant : Shri Prasad Vidhyadharan, CA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t, the assessee preferred the appeals before the first appellate authority. The CIT(A) allowed the appeals 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 appeals of the assessee, the CIT(A) followed the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.). 4. Subsequently, the CIT(A) issued notices u/s 154 of the I.T.Act proposing to rectify his orders passed, in view of the subsequent judgment of the Full 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 assessee objected to the issuance of notice. However, the CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 of the I.T.Act, disallowing the claim of the assessee u/s 80P(2) of the I.T.Act. 5. Aggrieved by the orders of the CIT(A), the assessee has filed these appeals be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be at the rate fixed by the Registrar of Co- operative Society under the Kerala Co-operative Societies Act and having its area of operation confined to a Village, Panchayath, or Municipality. The authority under the IT Act cannot probe into an issue of such matter relating to such an applicant. For this reason, it cannot but be held that the assessee is entitled to exemption from provision of Section 80P of the IT Act. The Ld. AR submitted that the assessee is entitled for exemption for its income under Section 80P(2) as claimed in the returns of income filed for the assessment year 2010-11 to 2014-15. 6.1 According to the Ld. AR, the Act permits deduction under Section 80P to a Primary Co-operative Society whose Primary objective is to provide financial accommodation to its members for agricultural purpose or for the purpose connected with the agricultural activities. The Ld. AR relied on the judgment of the Hon'ble High Court of Kerala in the case of the Kararinakam Service Co-operative Bank Ltd. in ITA No.25 of 2015 dt 15.02.2016 wherein it was held that the Primary Agricultural Credit Societies registered as such under the Kerala Co-operative Societies Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 thereunder. On such a claim for deduction under Section 80P of the IT Act, the Assessing Officer has to conduct an enquiry into the factual situation as to the activities of the assessee society and arrive at a conclusion whether benefits can be extended or not in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on (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 appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders 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 assessee society. 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 eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court (supra), I restore the issue of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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