2019 (6) TMI 1056 - AT - Income Tax

Eligibility of Cooperative Societies for Tax Deduction under Section 80P

The case involved the eligibility of cooperative societies for deduction under section 80P of the Income Tax Act. The Assessing Officer initially denied ... Eligibility to deduction u/s 80P - assessee are registered as cooperative societies under the Kerala State Co-operative Societies Act, 1969 - HELD THAT:- The Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. [2019 (3) TMI 1580 - KERALA HIGH COURT] held that AO 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. As held that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Cooperative Society classifying the assessee-society as a cooperative 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 issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessees and determine whether their activities are in compliance with the activities of a cooperative society functioning under the Kerala Co-operative Societies Act, 1969 and grant deduction u/s 80P(2) in accordance with law. - Appeals filed by the Revenue are allowed for statistical purposes. Issues:- Whether the assessees are entitled to deduction u/s 80P of the I.T. ActRs.Analysis:- The assessees, registered as cooperative societies under the Kerala State Co-operative Societies Act, were denied deduction u/s 80P by the Assessing Officer, treating them as cooperative banks.- The CIT(A) allowed the deduction based on a judgment of the Hon’ble jurisdictional High Court in favor of cooperative societies.- The Department challenged the CIT(A) orders citing conflicting decisions of the High Court, questioning the eligibility of deduction u/s 80P.- The Departmental Representative relied on the latest judgment of the Larger Bench of the High Court emphasizing the need for an inquiry into the activities of the assessee society for deduction eligibility.- The Larger Bench held that the Assessing Officer must verify the activities of the society each assessment year to determine eligibility for deduction u/s 80P.- The issue was restored to the Assessing Officer to examine the activities of the assessees and grant deduction u/s 80P in accordance with the law.- The appeals filed by the Revenue were allowed for statistical purposes based on the above analysis.This detailed analysis highlights the legal battle over the eligibility of cooperative societies for deduction u/s 80P of the I.T. Act, emphasizing the need for a factual inquiry into the activities of the assessee society for each assessment year to determine eligibility. The judgment underscores the importance of assessing compliance with the Kerala Co-operative Societies Act, 1969 to grant deductions appropriately.