9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2021 (10) TMI 970 - HC - Income TaxDeduction u/s 80P - assessee failed to produce the books of account and income earned from non-members, therefore, the assessee is not entitled to exemption under Section 80P(2) of total income - whether the assessee is a Primary Agricultural Credit Society or not, for, admittedly, the Society is registered under Kerala Societies Registration Act? - HELD THAT - In the case on hand, the observation of the Assessing Officer that books are not produced has not been expressly considered by the Appellate Authority and the Tribunal. The paragraphs excerpted from the judgment of the Supreme Court in Mavilayi Service Co-operative Bank Ltd case (supra) leaves no doubt that a Society registered under Kerala Co-operative Societies Act is entitled to claim deduction and the assessing authority determines the other incomes earned or derived by the assessee after according to assessee all the eligible deductions in this behalf. We are of the view that, in the case on hand, the matter requires reconsideration by the primary authority, for, the return filed by the assessee is examined in the light of decision of the Apex Court in Mavilayi Service Co-operative Bank Ltd case 2021 (1) TMI 488 - SUPREME COURT and fresh assessment orders are made. Hence, the orders in Annexures A, B, and C are set aside, case remitted to the Income Tax Officer for examination of books of accounts and verification of the return filed by the assessee for the subject year, strictly within the four corners of the dictum laid down by the Supreme Court in Mavilayi Service Co-operative Bank Ltd case and make a fresh assessment order. The assessee is entitled to file a fresh reply, if so advised, and the assessee is afforded an opportunity in accordance with law.
Issues Involved:
1. Eligibility for deduction under Section 80P(2) of the Income Tax Act. 2. Applicability of Section 80P(4) to the assessee. 3. Requirement for the assessee to produce books of accounts. 4. Examination of income derived from non-members. Detailed Analysis: 1. Eligibility for Deduction under Section 80P(2) of the Income Tax Act: The assessee, a Primary Agricultural Credit Society registered under the Kerala Cooperative Societies Act, claimed a deduction under Section 80P(2) of the Income Tax Act, 1961. The assessing officer disallowed the deduction, stating that the assessee was primarily engaged in the business of banking, thereby invoking Section 80P(4) which excludes certain co-operative societies from availing the deduction. The Commissioner of Appeals, however, allowed the deduction, recognizing the assessee as a Primary Agricultural Credit Society eligible under Section 80P(2). The Income Tax Appellate Tribunal upheld this decision, referencing the judgment in Chirakkal Service Co-operative Bank Ltd. v. CIT. 2. Applicability of Section 80P(4) to the Assessee: The Full Bench of the Kerala High Court in Mavilayi Service Cooperative Bank Ltd. v. Commissioner of Income Tax held that the assessing officer must conduct an enquiry into the activities of the assessee society to determine eligibility for deduction under Section 80P(2) post the introduction of Section 80P(4). The Supreme Court, however, reversed this view, stating that Section 80P(4) specifically excludes only co-operative banks that possess a license from the RBI to do banking business. The Court emphasized that Section 80P is a benevolent provision meant to promote the co-operative sector and should be interpreted liberally in favor of the assessee. 3. Requirement for the Assessee to Produce Books of Accounts: The Revenue argued that the assessee failed to produce books of accounts and income details from non-members, thus disqualifying them from claiming the deduction under Section 80P(2). The Supreme Court underscored the necessity for the assessing officer to conduct a fact-finding enquiry to ascertain if the society is genuinely providing credit facilities to its members. The assessee must demonstrate eligibility by providing relevant facts and documentation. 4. Examination of Income Derived from Non-Members: The Supreme Court clarified that while the co-operative society can claim deductions for profits attributable to providing credit facilities to its members, any income derived from non-members cannot be deducted. The assessing officer must scrutinize the accounts to segregate the income attributable to non-member activities and exclude it from the deduction. Conclusion: The Kerala High Court, referencing the Supreme Court's judgment in Mavilayi Service Co-operative Bank Ltd., remanded the case back to the primary authority. The Income Tax Officer is directed to re-examine the books of accounts and verify the returns filed by the assessee, ensuring compliance with the Supreme Court's guidelines. The assessee is permitted to submit a fresh reply, and the assessment must be conducted strictly within the legal framework established by the Supreme Court. The appeals are allowed and remanded for fresh assessment.
|
