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TMI Blog2019 (5) TMI 1266X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee society to determine the eligibility of deduction u/s 80P - 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 their 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her the interest received from the investments were denied deduction u/s 80P of the I.T.Act by treating the same as income from `other sources'. 4. Aggrieved by the orders of the assessment, the assessee filed appeal before the first appellate authority. The CIT(A) by following the judgment of the Hon'ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (384 ITR 490) allowed the claim of deduction u/s 80P of the I.T.Act. As regards interest received on investments, the CIT(A) held that the same should be assessed as `income from business' since these investments were made in the course of business of the assessee. It was concluded by the CIT(A) that such interest income was entitled to deduction u/s 80P of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 reported in 397 ITR l(SC), wherein it has been held that if a cooperative society is violating the principle of mutuality in the grab of persons who actually are not real members and indulging in banking business per se that it cannot claim the benefit of section 80P(2)(a)(i). (iv) The Ld. CIT(A) ought to have considered the following case laws: (a) 203 ITR 1027 (SC) in the case of Sabargantha Zilla Kharid Vechar Sangh Ltd. (b) 363 ITR 68 (Kerala) in the case of Perunthalmanna Service Corporative Bank. (c) 234 ITR 201 (Kerala) in the case of CIT Vs Kerala State Co-operative Marketing Federation 3. The present appeal involves substantial question of law on the issue of eligibility of interest income earned by the Appellant from o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nch of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. (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 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. The finding of the Larger Bench of the Hon'ble High Court re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-section (4) of Section 80P of the IT Act to ease themselves out from the coverage of Section 80P and that, the authorities under the IT Act cannot probe into any issues or such matters relating to such societies and that, Primary Agricultural Credit Societies registered as such under the KCS Act and classified so, under the Act, including the appellants are entitled to such exemption. 34. In Chirakkal [384 ITR 490] the Division Bench expressed a divergent opinion, without noticing the law laid down in Antony Pattukulangara [2012 (3) KHC 726] and Perinthalmanna [363 ITR 268]. Moreover, the law laid down by the Division Bench in Chirakkal [384 ITR 490] is not good law, since, in view of the law laid down by the Apex Court in Citizen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As regards the interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited (supra) 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 [ITA No.97/2016 order da ..... X X X X Extracts X X X X X X X X Extracts X X X X
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