TMI Blog2020 (6) TMI 614X X X X Extracts X X X X X X X X Extracts X X X X ..... ative Societies Act, 1969, before denying the claim of deduction u/s 80P(2). For the above said purpose, the issue raised in this appeal is restored to the files of the Assessing Officer. Assessing Officer shall examine the activities of the assessee-society by following the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) and shall take a decision in accordance with law - Appeal filed by the assessee is allowed for statistical purposes. - ITA No.160/Coch/2020 - - - Dated:- 24-6-2020 - Shri Chandra Poojari, AM And Shri George George K, JM For the Appellant : Sri.Amaljith For the Respondent : Sri.Mritunjaya Sharma, Sr.DR ORDER PER BENCH: This appeal at the instance of the assessee is directed against the order of the CIT(A), dated 20.12.2019. The relevant assessment year is 2009-2010. 2. The solitary issue argued was is whether the CIT(A) is justified in confirming the Assessing Officer s order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act. 3. The brief facts of the case are as follow: The assessee is a co-operative society ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ancial accommodation only to its members and that too for agricultural purposes and purposes connected with agricultural activities. (6) Central Board of Direct Tax Circular No. No.133/6 of 2007 dtd:9/5/2007 states that if the said entity is not being a cooperative bank, section 80P(4) of the Act would not apply to it. (7) As per Banking Regulation Act, 1949, discussed in detail by Hon. Kerala High Court in Muhammed Usman supra, when Share Capital of a cooperative credit society, which is doing banking activity, exceeds ₹ 1 lakh, such society automatically attains the character of Cooperative Bank. (8) In the case of Quepem Urban Cooperative Credit Society Ltd. (2015) 63 Taxmann 300(SC), the ITAT, Panaji Bench has stated that In our opinion it is not necessary that the cooperative society should have a banking licence as per the definition under the Income Tax Act for carrying on banking business. If licence is not obtained it may an illegal banking business under the other statute. Since the activities of the assessee Primary Agricultural Credit Society, other than providing financial accommodation only to its members and that too for agricultural purposes a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... larification No. 133/06/2006-07 dated 19-05-2007 issued by CBDT, New Delhi, which is binding on the Assessing Officer. B. The view of the Commissioner (Appeals) Thrissur as well as the Assessing Officer that Primary Agricultural Credit Cooperative Societies only are eligible for deduction u/s Section 80(P) is diametrically opposite to the viewpoints expressed by various appellate authorities all over the country in the decisions mentioned below, to name a few. (a) High Court of Karnataka in Bangalore Commercial Transport Credit Society Ltd - ITA NO: 598/2013 dated 27-06-2014 (b) High Court of Gujarat - Jafari Momin Vikas Co-op. Credit Society Ltd. in Tax Appeals no. 442 of 2013,443 of 2013 and 863 of 2013 on 15-01-2014 (c) High Court of Karnataka - Income Tax Officer Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot on 5th Feb 2014 (d) High Court of Bombay at Goa - Quepem Urban Cooperative Credit Society Ltd. vs Assistant Commissioner of Income-tax on 17-04-2015 (e) Madras High Court - The Commissioner of Income Tax vs NIC Employees Co-Operative Society on 10 August, 2016 (f) ITAT, Panaji - Athani Taluka primary teachers Cooperat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order may be declared as invalid. p 5.1 The learned AR relied on the grounds raised, however, did not raise any argument with regard to the reopening of assessment as valid or not. 5.2 The learned Departmental Representative, on the other hand, strongly supported the orders passed by the Income Tax Authorities. He has also filed a brief written submission, which reads as follow:- Reply on the Grounds of Appeal filed by the Assessee (in addition to the orders of Assessing Officer and Ld. CIT{Appeals): 2.1 Grounds nos. A D : The assessee is a known Cooperative Bank. The CBDT Circular No. 133/6 of 2007 dated 09/05/2007 is primarily issued in case of a particular assessee only, based on the facts and material on record. Further, the statutory provisions of Section 80P(4) of the Act can't override by any CBDT Circular. Moreover, the aforementioned Circular specifically excludes the primary agricultural credit societies which are actually entitled for the deduction u/s 80P of the Act. The assessee failed to prove before the AO and Ld. CIT{A) that it is a primary agricultural credit society; and is actually working as a fullfledged Cooperative Bank not entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h case of M/s Mavilayi Service Cooperative Bank Ltd. has been ernphaslsed. As summarised by the AO at Para 21.2 of its order (Pages 40-41), the assessee ought to have applied licence before the RBI for its banking activities as it had lost the character of primary agricultural credit society after exceeding share capital beyond ₹ 1 Lakh, which it has failed to do so and is illegally operating as Primary Agricultural Credit Society to evade tax which is nothing, but a colourable device adopted by the assessee. Further, the Bye-Laws of the Society does not prohibit admission of any other Cooperative Society as its member (which is one of the condition for qualification of primary agricultural credit societies as per the BR Act, 1949) {Refer Paras 23-26 of the AO's order at Pages 42-46]. 2.3 Grounds no. F: The assessee failed to file ITR within the due permissible and/or extended time. The following proviso of Section 139 mandates every Society (Association of Persons/ AOP) to file ITR: Provided also that every person, being an individual or a Hindu undivided family or an association of persons or a body of individuals, whether incorporated or not, or an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 490 (Ker.)] had held that when a certificate has been issued to an assessee by the Registrar of Co-operative 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 Cooperative 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 assessment year is separate and eligibility shall be verified b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [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. p 6.1 In the instant case, the Assessing Officer had denied the claim of deduction u/s 80P of the I.T.Act for the reason that assessee was essentially doing th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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