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2019 (5) TMI 1191 - AT - Income TaxDeduction u/s 80P(2) - assessee is registered as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969 - AO held that the assessee was doing the business of banking and loans disbursed by the assessee was for non-agricultural purpose - HELD THAT - The assessee is admittedly registered as a primary agricultural society under the Kerala Co-operative Societies Act, 1969 by the Registrar of Societies. As in the case of The The Mavilayi Service Co-operative Bank Ltd. V. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT 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 Cooperative Society classifying the assessee-society as a cooperative 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. Thus the issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether its activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. - Appeal filed by the Revenue is allowed for statistical purposes.
Issues:
- Whether the assessee is entitled to deduction u/s 80P(2) of the I.T.Act? Analysis: 1. Issue of Deduction u/s 80P(2) of the I.T.Act: - The appeal concerned the denial of deduction u/s 80P(2) of the I.T.Act to the assessee, a primary agricultural credit society. The Assessing Officer contended that the loans disbursed were for non-agricultural purposes, hence denying the deduction. - The CIT(A) allowed the claim based on the judgment of the Hon'ble jurisdictional High Court in a similar case. The CIT(A) held that being registered as a primary agricultural credit society was sufficient for the deduction u/s 80P(2) of the I.T.Act. - The Tribunal considered the factual situation and the activities of the assessee society. Referring to a Full Bench decision of the Hon'ble High Court, it emphasized that the Assessing Officer must conduct an inquiry each assessment year to determine the eligibility for the deduction u/s 80P of the I.T.Act. - The Tribunal directed the Assessing Officer to examine the activities of the assessee to ascertain compliance with the cooperative society's functions under the Kerala Co-operative Societies Act, 1969, and grant deduction u/s 80P(2) accordingly. 2. Significant Legal References: - The Full Bench decision highlighted the need for the Assessing Officer to investigate the activities of the society for each assessment year to determine the eligibility for deduction under Section 80P of the IT Act. - The judgment of the Hon'ble jurisdictional High Court in a related case emphasized that societies classified as Primary Agricultural Credit Societies under the KCS Act are entitled to the benefit of sub-section (4) of Section 80P of the IT Act. 3. Conclusion: - The Tribunal allowed the appeal filed by the Revenue for statistical purposes, directing the Assessing Officer to re-examine the eligibility of the assessee for deduction u/s 80P(2) of the I.T.Act based on the activities conducted as per the Kerala Co-operative Societies Act, 1969. This detailed analysis encapsulates the key legal issues, the relevant legal references, and the Tribunal's decision in the case concerning the entitlement of the assessee to deduction u/s 80P(2) of the I.T.Act.
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