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TMI Blog2020 (10) TMI 1121X X X X Extracts X X X X X X X X Extracts X X X X ..... de that the assessees 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). The issue raised in these appeals is restored to the files of the AO. AO shall examine the activities of the assessee-societies - Appeals filed by the assessee are allowed for statistical purposes. - ITA No.129/Coch/2020 - - - Dated:- 5-10-2020 - Shri Chandra Poojari, AM Shri George Mathan, JM For the Appellant : Sri.Amaljith P.J., CA For the Respondent : Sri.Shantom Bose, CIT-DR ORDER PER CHANDRA POOJARI, AM : This appeal at the instance of the assessee is directed against order of the CIT(A), dated 15.12.2016, passed u/s. 250 of the Income-tax Act. The relevant assessment year is 2011-12. 2. The CIT(A), after passing the order u/s 250 dated 15.12.2016, has also passed an order u/s 154 of the Act dated 07.01.2020 rectifying his earlier order, wherein levy of interest u/s 234A of the Act has not been considered. 3. The assessee has raised the following grounds:- 1. The reasons recorded for initiating proceedings u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me-tax Act found that for the purpose of understanding the cooperative society, the meaning that is given in section 2(19) of the Income-tax Act has to be considered and not otherwise. The co-operative societies are not controlled and governed by RBI and they are registered under the provisions of the State Co-operative Societies Act. There-fore, the Kerala High Court found that the co-operative societies are exempt from provisions of section 194A of the Act. A similar view was taken by the Kerala High Court in the case of ITO v. Thodupuzha Urban Co-operative Bank Ltd [2003] 264 ITR 36/132 Taxman 284 (Ker.). In this case before us also, admittedly, the taxpayers are registered under the Kerala State Co-operative Societies' Act and no approval was obtained from the RBI for carrying out the banking activities. Therefore, for all practical purposes, the taxpayers have to be treated as primary agricultural cooperative societies within the meaning of section 2(19) of the Income-tax Act. In view of the above, as found by the jurisdictional High Court, the taxpayers are exempt from deduction of tax at source u/s 194A of the Act. Accordingly, we are unable to uphold the orders of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the I.T.Act. The reasoning of the Assessing Officer to disallow the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act was that the assessee was essentially 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 deduction u/s 80P of the I.T.Act. 10. Aggrieved by the order passed by the Assessing Officer disallowing the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred appeal before the first appellate authority for all the assessment year under consideration. The CIT(A) placing reliance on the judgment of the Full Bench of the Hon ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [(2019) 414 ITR 67 (Ker.) (FB) (HC)] held that the Assessing Officer had made elaborate findings and has come to a factual finding that agricultural credit provided by the assessee is only minuscule and assessee cannot be termed as primary agricultural credit society. Accordingly disallowance of claim of deduction u/s 80P of the I.T.Act made by the Assessing Officer was upheld by the CIT(A). In the result the appeal filed b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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 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 mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 these cases, such a detailed examination has not been conducted by the A.O. At the time of assessment, the judgment of the Hon ble jurisdictional High Court in the case of Chirakkal Service Cooperative Bank Ltd. (supra) was ruling the roost and the certificate issued by the Registrar of Co-operative Society terming the assessee as a primary agricultural credit society would be sufficient for grant of deduction u/s 80P of the I.T.Act. 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. The A.O. shall list o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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