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2020 (3) TMI 1136

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..... g 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 examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly. - ITA No.39/Coch/2020 - Da .....

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..... 0P(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 of the CIT(A) is against law and facts. 2. The Commissioner Appeals should have appreciated that section 154 applies only in the case of errors apparent on records. The Commissioner (Appeals)had originally decided the appeal in favour of the appellant based on the decision of the Kerala High court in Chirakkal Service Cooperative Bank Ltd Vs CIT, Calicut (414 ITR 67) (Ker) which was binding on him. The Commissioner! Appeals) has erred in rectifying his order by invoking section 154 relying on the subsequent full bench decision of the Kerala High court in Mavilayil Service Co-operative Bank Ltd Vs CIT , Calicut ( 414 ITR 67)(Ker). The Learned Commissioner(Appeals)should have appreciated that the full bench of the Kerala High Court has only held that to ascertain the actual nature of the Cooperative Society as to whether it is a Primary Agricultural Cooperative Society (PACS) it is not enough if only the certificate issued by the Register of Cooperative Societies under the Kerala Cooperative Society Act 1969 is looked into, .....

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..... al 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 (supra). The Larger Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative 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 as .....

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..... pex 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 Cooperative Society [397 ITR 1] the law laid down by the Division Bench Perinthalmanna [363 ITR 268] has to be affirmed and we do so. 35. In view of the law laid down by the Apex Court in Ace Multi Axes Systems 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. 7.2 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 CI .....

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