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TMI Blog2019 (5) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... sue is remitted to the file of the Assessing Officer with the direction to examine the actual activities carried on by the assessee so as to grant deduction u/s. 80P of the Act. Accordingly, the issue in dispute is remitted to the file of the AO for fresh consideration in accordance with the above direction. This ground of appeals of the Revenue is partly allowed for statistical purposes. Deduction u/s. 80P(2)(a)(i) - HELD THAT:- With regard to the interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investments made with cooperative banks and other scheduled banks. The co-ordinate bench of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had held that such interest income received by the assessee should be assessed as income from business instead of income from other sources . In view of the order of the co-ordinate bench, we hold that the CIT(A) is justified in holding that interest income received by the assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ORDER PER CHANDRA POOJARI, AM: These appeals filed by the Revenue in ITA No. 143/Coch/2018 for the assessment year 2011-12, ITA Nos. 128/Coch/2019 and 151/Coch/2019 for the assessment years 2014-15 and 2015-16 are directed against the different orders of the CIT(A), Trivandrum. The appeal filed by the assessee in ITA No. 80/Coch/2018 for the assessment year 2014-15 is directed against the order of the CIT(A), Trivandrum dated 19/02/2018. 2. The Revenue has raised the following common grounds of appeals: 1) The Learned Commissioner of Income tax (Appeals), Trivandrum erred in concluding that the appellant, being a Primary Agricultural Credit Co-operative Society registered under the Kerala Co-operative Societies Act is entitled for exemption of its entire income under section. 80P(2)(a)(i) of the Act as originally claimed and they cannot be treated as Primary Co-operative Bank so as to invoke the provisions of section 80P(4) of the Act . 2) It is respectfully submitted that the respondent is essentially, a Cooperative bank and not merely a primary agricultural credit society and hence the allowance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions u/s. 80P are not available to the assesses merely on the basis of professed agricultural credits. (a) Rodier Mill Employees Co-operative Stores Ltd. vs. CIT 135 ITR 355(Mad) (b) CIT vs. Kerala State Co-operative Marketing Federation Ltd. (1998) 234 ITR 301 (Ker) (c) Kerala State Co-operative Agricultural Rural Development Bank Ltd. vs. ACIT (ITA No..506/Coch/2010 S.P. No.67/Coch/2010). For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income-tax(Appeals), Trivandrum on the above points may be set aside and that of the Assessing Officer restored. 3. The facts of the case for the AY 2014-15 are that the assessee is a Primary Agricultural Co-operative Society engaged in the business of providing credit facilities to its members apart from accepting loan from members as well as non members. They claimed to have given loans and advances for both agricultural and non agricultural purposes. The major source of income was interest income earned from loans and advances given both for agricultural and non agricultural purposes. The As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perative Bank Ltd. vs. CIT reported in ITA No.97/2018 dated 19.03.2019 wherein it was held that the Assessing Officer is not obliged to grant deduction by merely looking at the certificate of registration issued by the competent authority under the Co-operative Societies Act. Instead, he has to conduct an enquiry into the factual situation as to the activities of the assessee and arrive at a conclusion whether the benefits of section 80P can be extended or not. Thus, the Full Bench overruled the earlier judgment of the Jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. vs. CIT (384 ITR 490). The Full Bench had followed the judgment of the Supreme Court in the case of Citizen Co-operative Society Ltd. vs. ACIT reported in 397 ITR 1 (SC). In view of the latest judgment of the Jurisdictional High Court cited supra, this issue is remitted to the file of the Assessing Officer with the direction to examine the actual activities carried on by the assessee so as to grant deduction u/s. 80P of the Act. Accordingly, the issue in dispute is remitted to the file of the Assessing Officer for fresh consideration in accordance with the above direction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014-15. 11.1 Though the assessee has raised numerous grounds, the assessee has pressed only the following grounds: i) Addition made on deposits received from members and treating the same as unexplained cash credits u/s. 68 of the Act. ii) Disallowance of deduction u/s. 80P(2) of the Act on such income. 11.2 All other grounds raised by the assessee in its grounds of appeal are in support of the order of the CIT(A) which do not require any adjudication in view of our findings in the Revenue appeals. 12. The first ground is with regard to addition made on unexplained cash credits u/s. 68 of the Act. 12.1 The facts of the case are that on verifying the financial statement audited by the Co-operative Department, the Assessing Officer found that there was an increase in fixed deposits received by the assessee in cash during year under consideration to the tune of ₹ 4,17,39,766/-. The assessee was requested to furnish the details of such deposits received in cash to examine the correctness of the claim of interest paid. Instead of filing the requisite details, the assessee preferred to file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 68 of the Act is justified. Similarly, the CIT(A) was of the view that the decisions of this Tribunal relied on by the assessee are not applicable to its case as the income which was brought to tax was not earned from the regular business activities carried out by the assessee i.e advancing loan to members and earning interest therefrom. Once the income is not brought to tax as earned from regular business activities then, the said income is not entitled to the benefit of deduction u/s 80P(2)(a)(i) of the Act. According to the CIT(A) cash deposits received by the assessee during the year under consideration had nothing to do with the business income which alone can be considered for the exemption to be claimed u/s 80P(2)(a)(i) of the Act. It was observed that the unexplained cash credits which was brought to tax u/s 68 should necessarily be treated as income to be taxed but not as business income to be exempted u/s 80P(2)(a)(i). In view of all the above, the CIT(A) confirmed the decision of the Assessing Officer to bring to tax a sum of ₹ 4,17,39,766/- as unexplained cash credit u/s 68 of the Act in the absence of assessee s explanation about the nature and source of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se in income which is to be treated as business income for deduction u/s. 80P of the Act and covered by the decision of The ld. AR relied on the CBDT Circular No. 37/2016 wherein it was stated that disallowance which will increase the total income of the assessee is eligible for deduction under various provisions of Chapter VI-A does not affect taxable income. Therefore, addition u/s. 68 of the Act only increases the total income which is allowable for deduction u/s. 80P of the Act. 12.5. The Ld. DR relied on the order of the authorities below. 12.6 We have heard the rival submissions and perused the record. A similar issue was considered by the CIT(A) for the assessment years 2011-12 and 2015-16 wherein he has remitted the issue to the file of the Assessing Officer by observing as follows: The assessee has also raised the ground that the additions made under section 68 of the Act are eligible for deduction u/s. 80P of the Act. The claim of the Appellant is on the basis that the income assessed under section 68 of the Act is to be treated as business income and accordingly, deduction under section 80P to be allowed. However, the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sis of such a conclusion could not have been of any assistance to arrive at the conclusion of the Tribunal. entitled to set off the unexplained income under Section 68 of the Act in accordance with the provisions of the Act relating to set off. 8. We, therefore, set aside the order passed by the Tribunal, to the extent it has set aside the order of the Commissioner of Income Tax (Appeals) directing the Assessing Officer to allow the set off of current year business loss as well as brought forward business loss/unabsorbed depreciation against income assessed under Section 68 of the Act. Therefore, answering the question of law raised in favour of the Revenue, this appeal is disposed of. [Emphasis Supplied] 12.7 However, the CIT(A) has taken a different view for this assessment year 2014-15 which is not proper. Judicial discipline requires consistency in its proceedings. Being so, we are inclined to remit this issue to the file of the AO for this assessment year in conformity with the order of the CIT(A) with a direction to the assessee to provide details of the depositors along with the proof of identity to the Assessing Officer. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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