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TMI Blog2020 (2) TMI 924X X X X Extracts X X X X X X X X Extracts X X X X ..... e Kerala Co-operative Societies Act, 1969. For the assessment years under consideration, the returns of income were filed declaring income of Rs.Nil, after claiming deduction u/s 80P of the I.T.Act. The Assessing Officer passed orders u/s 143(3) of the I.T.Act, disallowing the claim of deduction u/s 80P of the I.T.Act. The 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 rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... justice. 2. The assessing officer denied the appellants claim under section 80P of the act based on amendment to section 80P by finance Act 2006, but the assessing officer erred in appraising the amendment properly. 3. The Act permits deduction under section 80P to a primary co operative society which has its primary objective to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. The appellant's primary objective is to provide financial accommodation to its members for agricultural purposes and is eligible for deduction under section 80P. 4. The amendment to section 80P do not restrict non agricultural service to its members but requires stipulation as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thorities 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, under the Act, including the appellants are entitled to such exemption. 34. In Chirakkal [384 ITR 490] the Division Bench expressed a divergent opinion, without noticing the law laid down in Antony Pattukulangara [2012 (3) KHC 726] and Perinthalmanna [363 ITR 268]. Moreover, the law laid down by the Division Bench in Chirakkal [384 ITR 490] is not good law, since, in view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1], on a claim for deduction under Section 80P of the Income Tax Act, by reason of sub-sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether the 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/ ..... X X X X Extracts X X X X X X X X Extracts X X X X
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