TMI Blog2020 (10) TMI 362X X X X Extracts X X X X X X X X Extracts X X X X ..... mine 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 allowed. - ITA No.165 to 167/Coch/2020 And SA No. 13 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ltd. v. CIT [ITA No.97/2016 order dated 19th March, 2019]. The assessee objected to the issuance of notices. However, the CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 of the I.T.Act, disallowing the claim of the assessee u/s 80P(2) of the I.T.Act. 6. Aggrieved by the orders of the CIT(A), the assessee have filed these appeals before the Tribunal raising the following identical grounds:- A. The assessment order as well as the order of the appellate authority are not legal and justifiable and justifiable. The contention of the revenue is that in view of the order of the full bench of Hon'ble High Court in Mavilayi Service Co-operative Bank Ltd., 414 ITR 67, the appellant is not entitled to get deduction under Section 80P of the Act. The above view has been accepted by the Commissioner of Income Tax (Appeals) and held that appellant is not eligible for deduction under Section 80P(2)(a)(I) of the Act. The said finding is not legal basis. B. The appellant society is registered under Kerala Cooperative Societies Act. As per Section 2(1) of the Kerala Cooperative Societies Act, member of a society includes nominal member as well as ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y declined the claim under Section 80P of the Act. The reasoning in the said judgment is that principle of mutuality which is the basis criterion for the society to claim deduction under 80(P) of the Act and if there is no identity between contributors and participators, mutuality failed and if there is no mutuality among the members of the petitioner society the benefit of Section 80(P) was denied to the petitioner. Actually the above judgment is not applicable and further, the said society was not registered as Primary Agriculture Credit Society. G. The Citizens Co-operative Society was established as per the Mutually Aided Cooperative Societies Act, 1995 as per the approved bylaw of the said society, it cannot admit 'nominal members'. But, most of the deposits were taken from the such category of persons, who cannot be members of the society and the on the basis of the above, it was find that the activities of the said society is clearly in violation to the Act and Rules and also the apprQ1aed byelaw. Thus, the Citizen Co-operative Society case the Hon'ble Supreme Court was not considered about the eligibility of a Primary Agricultural Credit Society for deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd then only proceeding can be initiated for realization of the alleged tax and hence, there is no justification in dismissing the appeal on the ground that the Full Bench in Mavilayi's case. J. The appellant society is not liable to pay any amount as Income Tax and the appellant is entitled to obtain deduction under section 80(P)(2) of the Income Tax Act, since, the same is society is Primary Agricultural Credit Society. There is no dispute with respect to the entitlement of the Primary Agricultural Credit Societies get deduction under 80(P)(4) of the Act. In Mavilayi case, the Hon'ble High Court has not considered the merit of the each case and thereby there is no justification for denying the benefit under Section 80(P)(4) of the Act and hence, there orders passed by the assessing authority and the appellate authority are liable to be setaside. K. Against the reference order in Mavilayi's cas, the said co-operative bank has filed appeal [SLP (Civil), Diary No. '27628/2019] before the Hon'ble Supreme Court. The appeal has been admitted b the Hon'ble court and registered as SLP (C) No.22491 of 2020 and the said appeal is pending. Thus, whether it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uction 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 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 Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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. 8.1 The CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed order u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied, by relying on the judgment of the Larger Bench of the Hon ble jurisdictional High Court in the case of The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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