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2020 (9) TMI 623 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - assessee was essentially doing the business of banking, and therefore, in view of insertion of section 80P(4) with effect from 01.04.2007, the assessee will not be entitled to deduction u/s 80P - HELD THAT - In the light of the dictum laid down in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT 2019 (3) TMI 1580 - KERALA HIGH COURT we are of the view that there should be fresh examination by the AO as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes etc. and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Cooperative Societies Act, 1969, before denying the claim of deduction u/s 80P(2). For the above said purpose, the issue raised in these appeals is restored to the files of the Assessing Officer. The Assessing Officer shall examine the activities of the assessee-society by following the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) and shall take a decision in accordance with law. Appeals filed by the assessee are allowed for statistical purposes.
Issues:
Whether the CIT(A) was justified in confirming the Assessing Officer's order in denying the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act. Analysis: The appeals were filed by the assessee against the common order of the CIT(A) for the assessment years 2009-2010 and 2014-2015, challenging the denial of deduction u/s 80P(2)(a)(i) of the I.T.Act. The Assessing Officer disallowed the claim, stating that the assessee was essentially engaged in banking activities, making them ineligible for the deduction under section 80P(4) of the I.T.Act introduced from 01.04.2007. The CIT(A) upheld the disallowance, relying on the judgment of the Full Bench of the jurisdictional High Court. The assessee contended that they were a Primary Agricultural Credit Society, not a Primary Co-operative Bank, and challenged the CIT(A)'s decision before the Tribunal. The Hon'ble jurisdictional High Court had previously held that if a certificate characterizing an assessee as a primary agricultural credit society is issued by the Registrar of Co-operative Societies, then the deduction u/s 80P(2) of the I.T.Act must be granted. However, a Full Bench of the High Court in a subsequent case reversed this finding, emphasizing that the Assessing Officer must conduct an inquiry into the activities of the assessee society to determine eligibility for the deduction. The Full Bench clarified that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Co-operative Society and must verify eligibility for each assessment year separately. In the present case, the Assessing Officer concluded that the assessee's business was primarily banking, with only a small portion of loans being agricultural. The Tribunal noted that a detailed examination of each loan disbursement was necessary to determine whether they were for agricultural purposes. Considering the Full Bench's ruling, the Tribunal directed the Assessing Officer to reexamine the nature of each loan disbursement and decide on the eligibility for the deduction u/s 80P(2) of the I.T.Act based on compliance with the activities of a primary agricultural credit society under the Kerala Cooperative Societies Act, 1969. The issue was remanded back to the Assessing Officer for a fresh examination. In conclusion, the appeals filed by the assessee were allowed for statistical purposes, and the Tribunal's decision was pronounced on 14th September 2020.
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