TMI Blog2020 (3) TMI 1135X X X X Extracts X X X X X X X X Extracts X X X X ..... ies of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer to 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/s 80P(2) of the I.T.Act. Interest on the investments with Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative 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 of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k 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 an order 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 order of the CIT(A), the assessee has filed this appeal before the Tribunal raising the following grounds: 1. The order dated 3-9-2019 passed under section 154 r.w.s 250 of the Income Tax Act modifying the order dated 5-3-2019 and thereby dismissing the appeal filed by the appellant confirming the order 27-12- 2016 passed by the Income Tax Officer, Ward- 2 (3), Trivandrum for the AY 2014-15 is highly illegal, arbitrary, unjustified and contrary to the law and facts of the case. 2. The CIT (Appeals) erred in invoking section 154 of the Act and passing order dated 3-9-2019 modifying the order dated 5-3-2019. 3. The CIT (Appeals) thoroughly erred in modifying the order dated 5- 3-2019 and dismissing the appeal filed by the appellant holding that the order dated 27-12-2016 passed by the assessing officer is in accordance with the judgment dated 19-3-2019 passed by the F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of Chirakkal Service Co-operative Bank Ltd. (supra) by holding that the activities of the assessee has to be examined to determine whether the assessee is Co-operative society or cooperative bank. In the light of the Larger Bench judgment of the Hon ble Kerala High Court, the earlier CIT(A) order s granting deduction u/s. 80P(2) of the I.T. Act have been rightly recalled by the CIT(A). Therefore the grounds raised by the assessee that the CIT(A) has erred in passing order u/s. 154 of the I.T. Act are dismissed 7.1 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.)] had held that when a certificate has been issued to an assessee by the Registrar of Cooperative Societies characterizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) of the I.T.Act has to be granted to the assessee. However, the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) had reversed the above findings of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, 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-section (4) thereof, 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 the provisions under sub-section (4) of Section 80P of the IT Act. In view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1] the law laid down by the Division Bench Perinthalmanna [363 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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