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TMI Blog2020 (9) TMI 727X X X X Extracts X X X X X X X X Extracts X X X X ..... ety registered under the Kerala Co-operative Societies Act, 1969. For the assessment years under consideration, returns were filed after claiming deduction u/s 80P of the I.T.Act. The assessment orders were passed for assessment years under consideration, wherein the Assessing Officer disallowed 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)(a)(i) of the I.T.Act was that the assessee was essentially 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 deduction u/s 80P of the I.T.Act. 5. Aggrieved by the orders passed by the Assessing Officer disallowing the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred appeals before the first appellate authority for all the assessment years under consideration. The CIT(A) placing reliance on the 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 [(2019) 414 ITR 67 (Ker.) (FB) (HC)] held that the Assessing Officer had made elaborate findings and h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for "Primary Co-operative Bank and Primary Credit Society and not to PACS. In ITO, Bangalore v. Yeshwantpur Credit Co-operative Society Ltd., the IT AT following the ratio in Bangalore Commercial Transport Credit Co operative Society Ltd., in ITA 1069/ Bang/2010 dated. 08-04-2011 held that there was a clear distinction between a co-operative bank and a co-operative society. It is held that the benefits of Section 80P is denied only to Co-operative Banks u/ s. 80P(4), whereas the benefit is available and extended to PACS Section 80P(4) does not define the word "Co-operative Society". Therefore, the provisions of the Banking Regulation Act does not get attracted to the facts and circumstances of the case of the appellant. F: The first appellate authority ought to have noted that the appellant is not a co-operative bank licensed b the Reserve Bank of India. Appellant is originally registered as PACS and no reclassification made by the RBI. So much so, the disallowance of deduction claimed u/s 80P is illegal and unjustified. G: The Hon'ble High Court of Kerala in Chirakkal Service Co-operative Bank's case reported in 384 ITR 490 held that once a certificate classifying the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty 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 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 activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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." 7.1 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 the business of banking and disbursement of agricultural loans by the assessee was only minuscule. Therefore, the Assessing Officer concluded that the assessee cannot be treated as co-operative society. The Assessing Officer after perusing the narration of the loan extracts in the statutory audit report for assessment years under consideration, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. We are of the view that the narration in loan extracts in the audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and dete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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