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TMI Blog2020 (10) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 received by the assessee on investments made with District Co-operative Banks. 4. Aggrieved by the orders of assessment denying the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred appeals to the first appellate authority. The CIT(A) allowed the appeals by holding that the assessee was eligible for deduction u/s 80P of the I.T.Act. The interest income received from other banks and treasury also was allowed as deduction u/s 80P(2)(a)(i) of the I.T.Act. In allowing the appeals of the assessee, the CIT(A) followed the judgment of 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.). 5. Subsequently, the CIT(A) issued notices u/s 154 of the I.T.Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Tribunal considered a similar matter in ITA No 525/Coch/2014 in The Kizhathadiyoor Service Cooperative Bank Ltd Vs. The Income Tax Officer Ward - 2 Kottayamand held that Section 80P(2(d) of the Income Tax Act provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. So, the interest is derived for deposits with District Co-operative Bank and the interest income received from the above bank are eligible for deduction under section 80P (2)(d) of the Income Tax Act and cannot be assessed as income from other source. Hence, the order issued by the appellate authority is not legal. E. Section 80P(2(d) of the Income Tax Act provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in another cooperative society. In the instant case, the interest is derived for deposits maintained with District Co-operative Bank and the interest income received from the above bank are eligible for deduction under section 80P (2)(d) of the Income Tax Act and cannot be assessed as income from other source. Hence, the order iss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in the bye-laws;" Hence, the nominal members are also the members of the society in accordance with the provisions itself and the deposits from such nominal members cannot be considered as deposits from the non-members or from public. In short, the deposits form nominal members cannot be said that deposits from non-members, since, the nominal members are also members of the society in accordance with the KCS Act and Rules and the approved byelaw of the society. Hence, the order issued by the assessing authority and also the appellate authority are not legal and the same are liable to be set aside. I. In Mavilayi's case, the Hon'ble Court has not considered the issue regarding the entitlement of the Primary Agricultural Credit Societies for deduction under Section 80'(P) of the Act. So, whether, the petitioner society is entitled to get deduction under Section 80(P) of the Income Tax Act or not yet to be considered by the assessing authority in accordance with the directions contained in the order referred above. That is, a fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer and the C.LT. (Appeals) relying on unrelated decisions is denial of natural justice to the appellant. Hence, the impugned orders are faulty. N. The decisions of various High courts and ITATs across the country on the disallowance of claim for deduction under section 80(P), adopted on the basis of CBDT clarification No.133/06/2006-07 dated 19-05-2007 has to be considered by the authorities in the proper perspective. But, the authorities under the statute proceeded the matter-with a pre-determined view and declined the benefit of Section 80P of the Act. So, the impugned orders issued by the assessing authority as well as the appellate authority may be interfered and the said orders may be setaside in the interest of justice." 7. The learned AR relied on the grounds raised. The learned Departmental Representative, on the other hand, strongly supported the orders of the Income-tax authorities. 8. We have heard the rival submissions and perused the material on record. 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities and to provide loans and advances for agricultural purposes, the rate of interest on such loans and advances to be at the rate to be fixed by the Registrar of Co-operative Societies under the KCS Act and having its area of operation confined to a Village, Panchayat or a Municipality and as such, they are entitled for the benefit of sub-section (4) of Section 80P of the IT Act to ease themselves out from the coverage of Section 80P and that, the 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 reas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rder of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited in ITA No.525/Coch/2014 (order dated 20.07.2016), 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-societies before granting deduction u/s 80P of the I.T.Act on such interest income. It is ordered accordingly.
9. Since we have disposed of the appeals filed by the assessee, the Stay Applications filed by the assessee become infructuous and the same are dismissed as such.
10. In the result, the appeals filed by the assessee are allowed for statistical purposes and the Stay Applications are dismissed.
Order pronounced on this 07th day of October, 2020. X X X X Extracts X X X X X X X X Extracts X X X X
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