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TMI Blog2020 (4) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. - ITA No.148/Coch/2020 - - - Dated:- 20-4-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ITA No.97/2016 order dated 19th March, 2019]. The assessee objected to the issuance of notice. However, the CIT(A) rejected the objections raised by the assessee and passed order u/s 154 of the I.T.Act, disallowing the claim of the assessee u/s 80P(2) of the I.T.Act. 6. Aggrieved by the order of the CIT(A), the assessee has filed this appeal before the Tribunal raising the following grounds:- A. Against the assessment order, the appellant filed statutory appeal before the Commissioner (Appeals), Thiruvanthapuram and the appeal was allowed as per order dated 25.05.2018. The said order has become final and no further action was taken by the Revenue against the order issued by the appellate authority. So, the rectification order issued by the Appellate Authority is not legal, as there is no apparent error on the face of record of the order issued by the appellate authority. B. The contention of the revenue is the rectification application that is that in view of the reference order of the full bench of Hon'ble High Court of Kerala in Mavilayi Service Cooperative Bank Ltd., 414 ITR 67, the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank are eligible for deduction under section 80P (2)(d) of the Income Tax Act and cannot be assessed as income from other source. Hence, the order issued by the appellate authority is not legal. F. By relying the dictum in Citizens Co-operative Society Limited Vs. ACIT reported in 397 ITR 1), the appellate authority declined the claim under Section 80P of the Act. The reasoning in the said judgment is that principle of mutuality which is the basis criterion for the society to claim deduction under 80(P) of the Act and if there is no identity between contributors and participators, mutuality failed and if there is no mutuality among the members of the petitioner society the benefit of Section 80(P) was denied to the petitioner. Actually the above judgment is not applicable and further, the said society was not registered as Primary Agriculture Credit Society and the said society was functioning contrary to the approved bye-law as well as the Act and Rules. G. The Citizens Co-operative Society was established as per the Mutually Aided Cooperative Societies Act, 1995 as per the approved bylaw of the said society, it cannot admit 'nominal members'. But, most of the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... So, whether, the petitioner society is entitled to get deduction under Section 80(P) of the Income Tax Act or not yet to be considered by the assessing authority in accordance with the directions contained in the order referred above. That is, a fresh adjudication at the hands of the assessing authority is necessary so as to consider whether the petitioner society is entitled to get deduction or not and then only proceeding can be initiated for realization of the alleged tax and hence, there is no justification in dismissing the appeal on the ground that the Full Bench in Mavilayi's case. J. The appellant society is not liable to pay any amount as Income Tax and the appellant is entitled to obtain deduction under section 80(P)(2) of the Income Tax Act, since, the same is society is Primary Agricultural Credit Society. There is no dispute with respect to the entitlement of the Primary Agricultural Credit Societies get deduction under 80(P)(4) of the Act. In Mavilayi case, the Hon'ble High Court has not considered the merit of the each case and thereby there is no justification for denying the benefit under Section 80 (P)(4) of the Act and hence, there orders passed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to dispose of this appeal on merits after hearing the learned Departmental Representative. 8. I have heard the learned DR and perused the material on record. The Hon ble Kerala High Court in the case of Kil Kotagiri Tea Coffee Estates Co. Ltd. v. ITAT reported in 174 ITR 579 had held that when an authority has decided on the basis of a decision of the High Court which is subsequently reversed, there would be a rectifiable mistake coming within the section 154 of the Income-tax Act. The Larger Bench of the Hon ble Kerala High Court has reversed the dictum laid down by the judgment of the Hon ble Kerala High Court in the case of Chirakkal Service Co-operative Bank Ltd. (supra) by holding that the activities of the assessee has to be examined to determine whether the assessee is Co-operative society or cooperative bank. In the light of the Larger Bench judgment of the Hon ble Kerala High Court, the earlier CIT(A) order s granting deduction u/s. 80P(2) of the I.T. Act have been rightly recalled by the CIT(A). Therefore the grounds raised by the assessee that the CIT(A) has erred in passing order u/s. 154 of the I.T. Act are dismissed 8.1 The Hon ble jurisdictional High Court ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Credit Societies 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. 8.3 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 in ITA No.525/Coch/2014 (order dated 20.07.2016), 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. The Assessing Officer shall also examine whether the assessee is entitled to deduction u/s 80P(2)(d) of the I.T.Act, provided, facts are already available on record for such deduction. It is ordered accor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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