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TMI Blog2020 (10) TMI 987X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 - KERALA HIGH COURT] we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. A.O. shall list out the instances where loans have disbursed for non-agricultural purposes and accordingly conclude that the assessee s activities are not in compliance with the activities of primary agricultural credit society functioning under the Kerala Co-operative Societies Act, 1969, before denying the claim of deduction u/s 80P(2) - Appeal filed by the assessee is allowed for statistical purposes - ITA No. 355/Coch/2020, SA No. 194/Coch/2020 - - - Dated:- 21-10-2020 - Shri Chandra Poojari, AM And Shri George Mathan, JM For the Appellant : Shri T.M. Sreedharan For the Respondent : Shri B. Sajjiv, Sr. DR ORDER PER BENCH : These appeal at the instance of the assessee is directed against the orders of the CIT(A), dated 08.09.2020. The assessee has also preferred stay application seeking to stay the recovery of outstanding tax arrears. The relevant assessment year is 2017-18. 2. The solitary issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Income Tax Act. In this connection, it is respectfully submitted that the Assessing Officer and the CIT(A) should have held that the appellant is a Primary Agricultural Credit Society(PACS) and is governed by the Kerala Co-operative Societies Act, 1969. 4. The Appellate Authority should have found that the exclusion from exemption as per Sub Sec.(4) of Sec.80P would not apply to the appellant, since the appellant is a Primary Agricultural Credit Society. 5. In this connection, the appellant respectfully submits that the appellant is a Co-operative Society registered under the Kerala Co-operative Societies Act 1969. The area of operation of the Society is Mugu village from the time of its inception. The principal object of the Society is to provide short term and medium term loan for various agricultural purposes to its members, such as procurement of seeds, manure, pesticides and agricultural impediments etc. The dealings of the Society are with its own members. The Society has been enjoying the exemptions and deductions as per Section 80P of the Act in the past. 6. For the Assessment Year 2011-12, the deduction u/s 80P(2) was denied by the Assessing Officer. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncluding the marketing of crops; and (ii) the bye- laws of which do not permit admission of any other Co-operative Society as a member are eligible for exemption/deduction. These provisions were highlighted before the CIT(A), who has failed to appreciate and consider the above grounds judiciously. 12. A perusal of the order of the CIT(A), would also show that the impugned order passed by him is mechanically and without application of mind and hence, liable to be set aside. 13. Kind attention of this Hon'ble Tribunal is also invited to the CBDT Circular NO.133 of 2007 dated 9.05.2007 explaining the scope of Sub Sec.(4) of Sec.80P. It was clarified that Sec.80P(4) will exclude only Co-operative Banks which are not credit Societies. So much so, Credit Co-operative Societies, which are not Cooperative Banks are not excluded under Sub Sec.(4) of Sec.80P and that Sub Section would not apply . 14. This Hon'ble Appellate Tribunal has taken a decision, in the case of M/s Pattambi Service Co-operative Bank Ltd., in favour of the Society under similar circumstances and the same principle is applicable to the assessee's case vide I.T.A. NO.97/Coch/2020 and simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court in Citizen Co-operative Society [397 ITR 1] it cannot be contended that, while considering the claim made by an assessee society for deduction under Section 80P of the IT Act, after the introduction of sub-section (4) thereof, the Assessing Officer has to extend the benefits available, merely looking at the class of the society as per the certificate of registration issued under the Central or State Co-operative Societies Act and the Rules made thereunder. On such a claim for deduction under Section 80P of the IT Act, the Assessing Officer has to conduct an enquiry into the factual situation as to the activities of the assessee society and arrive at a conclusion whether benefits can be extended or not in the light of the provisions under sub-section (4) of Section 80P. 33. In Chirakkal [384 ITR 490] the Division Bench held that the appellant societies having been classified as Primary Agricultural 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 s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80P(2) of the I.T. Act. The Assessing Officer after perusing the narration of the loan extracts for the financial periods under consideration, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricultural purpose. In this case, such a detailed examination has not been conducted by the A.O s. In the light of the dictum laid down by the Full Bench of the Hon ble Kerala High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra), we are of the view that there should be fresh examination by the Assessing Officer as regards the nature of each loan disbursement and purpose for which it has been disbursed, i.e., whether it for agricultural purpose or not. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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