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TMI Blog2020 (1) TMI 965X X X X Extracts X X X X X X X X Extracts X X X X ..... 26 - KERALA HIGH COURT] had held that the A.O. 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. In view of the dictum laid down by the Full Bench of the Hon ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. AO shall examine the activities of the assessee and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. Interest on the investments with Cooperative Banks and other Banks , the co-ordinate Bench orde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r claiming deduction u/s 80P of the I.T.Act. The Assessing Officer passed an order u/s 143(3) of the I.T.Act vide order dated 28/12/2017 disallowing the claim of deduction u/s 80P of the I.T.Act. The reasoning of the Assessing Officer to disallow the claim of deduction u/s 80P(2) of the I.T.Act was that the assessee was doing the business of banking, and therefore, in view of insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007, the assessee will not be entitled to the deduction u/s 80P(2) of the I.T.Act. The Assessing Officer also disallowed the claim of deduction with regard to interest income received by the assessee on investments made with District Co-operative Banks. 3. Aggrieved by the order of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his case was passed on 28/12/2017 when the full bench dcecision of the Kerala High Court was not pronounced. This decision was daterd 19/03/2019 and therefore the Assessing Officer did not carry out any enquiry or required the Appellant to produce certificate from the Registrar of Co-operative Societies certifying their main activities, which was a pre condition laid down by the Kerala High Court in para 31 if their judgment 19/03/2019. 3. In view of the above the CIT appeals has erred in holding that the AO has conducted sufficient enquiry into the activities of the Society and concluded that it is not a primary agricultural credit society and therefore not eligible for deduction u/s. 80P. 4. The CIT Appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rizing it as primary agricultural credit society, necessarily, the deduction u/s 80P(2) of the I.T.Act has to be granted to the assessee. However, the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra) had reversed the above findings of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT (supra) . The Larger Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ocieties by the competent authority under the KCS Act, it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes, the rate of interest on such loans and advances to be at the rate to be fixed by the Registrar of Co-operative Societies under the KCS Act and having its area of operation confined to a Village, Panchayat or a Municipality and as such, they are entitled for the benefit 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 Agricu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecified class of societies for which the deduction is provided, even if it was eligible in the initial years. 7.1 The CIT(A) had initially allowed the appeal of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed order u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied, by relying on the judgment of the Larger Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra). The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon ble jurisdi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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