TMI Blog2023 (5) TMI 910X X X X Extracts X X X X X X X X Extracts X X X X ..... AO and acted upon in accordance to law. Thus reasons given by Ld. CIT(A) about the omission on the part of assessee in filing the return of income u/s 139(1)/142(1)/148 of the Act cannot be a ground for these AY s before us. Other reason given by the Ld. CIT(A) to deny the claim of deduction under section 80P of the Act claim was that the assessee society cannot be termed as Primary Agricultural Credit Society [PACS] even though, there was a certificate of the Registrar of Co-operative Societies - We note that the AO/Ld. CIT(A) had no benefit of the decision rendered in the case of Malvilayi Service Co-operative Bank Ltd ( 2021 (1) TMI 488 - SUPREME COURT] - Therefore, in the interest of justice and equity, the issue of claim for deduction u/s 80P(2)(a)(i) of the Act is restored back to file of AO who is directed to examine afresh the claim of assessee in the light of the Hon ble Apex Court decision in Malvilayi Service Co-operative Bank Ltd (supra). Therefore, the impugned order of Ld. CIT(A) is set aside, and issue is restored back to the file of the AO. Appeals of the assessee are allowed for statistical purposes. - I.T.A. No. 32/Coch/2023 And I.T.A. No. 33/Coch/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same by stating that merely because certificate has been issued by Registrar of Co-operative Societies, it cannot be the only factor for being eligible for the benefit u/s 80P of the Act and observed the principle that substance over form needs to be examined to find out whether assessee society was PACS and he accepted the view of AO that assessee is not a PACS; and he also found fault with the assessee for not filing of return of income u/s 139(1) within time for AY. 2009-10; and found that assessee had filed the return only in response to the Department notice u/s 148 of the Act on 15.06.2016, which is belated. And therefore, he upheld the action of the AO. Aggrieved by the aforesaid action of the Ld. CIT(A), the assessee has preferred the appeal before us for both AY 2009-10 as well as AY. 2014-15. 3. We have heard both the parties and perused the records. One of the reasons given by the Ld. CIT(A) while confirming the action of the AO to deny the claim of deduction u/s 80P of the Act was that the assessee society did not file its return of income within the due time as prescribed u/s 139(1) of the Act; and had filed the same only in response to notice u/s 148 of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Finance Act of 2006 with effect from 1.4.2006. This clearly evidences the legislative intendment that the inhibition contained in subsection 5 of section 80A would operate by itself. In cases where returns have been filed, the question of exemptions or deductions referable to section 80P would definitely have to be considered and granted if eligible. 20. Here, questions would arise as to whether belated returns filed beyond the period stipulated under section 139(1) or section 139(4) as well as following sections 142(1) and 148 proceedings could be considered for exemption. If those returns are eligible to be accepted in terms of law, going by the provisions of the statute and the governing binding precedents, it goes without saying that the claim for exemption will also stand effectuated as a claim duly made as part of the returns so filed, for due consideration. 21. When a notice under section 142(1) is issued, the person may furnish the return and while doing so, could also make claim for deduction referable to section 80P. Not much different is the situation when pre-assessment enquiry is carried forward by issuance of notice under section 142 (1) or when notice is issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illing this criteria it cannot be said to be a PACS, . We note that such a contention of the revenue has not been accepted by the Hon ble Apex Court in the case of Malvilayi Service Co-operative Bank Ltd. Ors Vs. CIT (431 ITR 1) while reversing the full bench decision of the Hon ble Kerala High Court the Hon ble Supreme Court held as under: - 45. To sum up, therefore, the ratio decidendi of Citizen Cooperative Society Ltd. (supra), must be given effect to. Section 80P of the IT Act, being a benevolent provision enacted by Parliament to encourage and promote the credit of the co-operative sector in general must be read liberally and reasonably, and if there is ambiguity, in favour of the assessee. A deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication, as is sought to be done by the Revenue in the present case by adding the word agriculture into section 80P(2)(a)(i) when it is not there. Further, section 80P(4) is to be read as a proviso, which proviso now specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ify for the purpose of deduction under section 80P(2)(a)(i). 47. Further, unlike the facts in Citizen Cooperative Society Ltd. (supra), the Kerala Act expressly permits loans to nonmembers under section 59(2) and (3), which reads as follows: 59. Restrictions on loans. (1) A society shall not make a loan to any person or a society other than a member: Provided that the above restriction shall not be applicable to the Kerala State Co-operative Bank. Provided further that, with the general or special sanction of the Registrar, a society may make loans to another society. (2) Notwithstanding anything contained in sub-section (1), a society may make a loan to a depositor on the security of his deposit. (3) Granting of loans to members or to non-members under subsection (2) and recovery thereof shall be in the manner as may be specified by the Registrar. Thus, the giving of loans by a primary agricultural credit society to non-members is not illegal, unlike the facts in Citizen Cooperative Society Ltd. (supra). 48. Resultantly, the impugned Full Bench judgment is set aside. The appeals and all pending applications are disposed of accordingly. These appeals are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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