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TMI Blog2020 (2) TMI 832X X X X Extracts X X X X X X X X Extracts X X X X ..... ng Officer to 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 Co-operative Banks and other Banks - Tribunal in the case of Kizhathadiyoor Service Co-operative Bank Limited [ 2016 (7) TMI 1405 - ITAT COCHIN] had 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 (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. Appeals filed by the assessee are partly allowed for statistical purposes. - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions raised by the assessee and passed orders u/s 154 of the I.T.Act, disallowing the claim of the assessee u/s 80P(2) of the I.T.Act. 5. Aggrieved by the orders of the CIT(A), the assessee has filed these appeals before the Tribunal raising following identical grounds except for variation in figures. The grounds raised for the assessment year 2012-13 read as follows: 1. The order of the CIT (A) is without justification i.e., contrary to the law, facts and circumstances of the case and at any rate opposed to principles of equity, natural justice and fair play. 2. The learned CIT (A) erred in disallowing deduction claimed of ₹ 1,34,616/-u/s 80P of the Income Tax Act on the ground that, the appellant does not fall under the category of Primary Agricultural Credit Society, as defined by Part-V of Banking Regulation Act, 1949. 3. The learned CIT (A) erred in holding that the appellant is a Co-operative Society registered under the Co-operative Societies Act and a Primary Agricultural Credit Society (under Rule 15 (1) (A) (3) (a) of the Kerala Co-operative Societies Act) as recognized by the Assistant Registrar (General) of Co-operative Societies, Cherthala on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce your appellant is not a Co-operative Bank as defined in the Banking Regulation Act, restriction does not apply to the appellant. Your appellant already possesses a certificate from the competent authority regarding its status as Primary Agricultural Credit Society (PACS). Hence the benefit of Section 8OP is available to your appellant. Even though the CIT (A) disregarded the claim of your appellant as a PACS, he ought to have appreciated that the Society is not a Co-operative bank as defined in Banking Regulation Act. Your appellant trust that, even if the status of PACS is rejected, deduction under 80P is to be allowed considering it as a Co-operative Society, not being a Co-operative Bank, providing credit or finance to the members or otherwise. 6. The learned CIT(A) ought to have noted that the income of the appellant included income that was exempt not only u/s 80P(2)(a)(i) of the Income Tax Act, but also income that were, exempt u/s 80P(2)d) of the Income Tax Act, which fact has been overlooked by the CIT (A). 7. The learned CIT(A) erred in adding ₹ 70,696/- to the Total Income by applying 36(1) (vii) of the Income Tax Act. Your appellant had already a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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 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 Co-operative Society classifying the assessee-society as a co-operative 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 reads as follows:- 33. In view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1] it cannot be contended that, while considering the claim m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e extended or not in the light of the provisions under sub-section (4) of Section 80P of the IT Act. In view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1] the law laid down by the Division Bench Perinthalmanna [363 ITR 268] has to be affirmed and we do so. 35. In view of the law laid down by the Apex Court in Ace Multi Axes Systems case (supra), since each assessment year is a separate unit, the intention of the legislature is in no manner defeated by not allowing deduction under Section 80P of the IT Act, by reason of sub-section (4) thereof, if the assessee society ceases to be the specified class of societies for which the deduction is provided, even if it was eligible in the initial years. 7.2 The CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders 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 h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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