2019 (8) TMI 510 - AT - Income Tax

Tribunal remands case for Section 80P deduction eligibility verification.

The Income Tax Officer Ward – 4 Tirur. Versus M/s. Kodur Service Cooperative Bank Ltd.

The Tribunal remanded the case to the Assessing Officer to determine the assessee's eligibility for deduction under Section 80P of the Income Tax Act. The ... Entitled to deduction u/s 80P - AO for denying the claim of deduction u/s 80P treated the assessee as co-operative bank and not co-operative society - HELD THAT:- The Larger Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Cooperative Bank Ltd. [2019 (3) TMI 1580 - KERALA HIGH COURT] held that the 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 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 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. Issue of deduction u/s 80P(2)(a)(i) is restored to the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether the 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. It is ordered accordingly- Appeal filed by the Revenue is allowed for statistical purposes. Issues Involved:1. Entitlement of the assessee to deduction under Section 80P of the I.T. Act.Issue-wise Detailed Analysis:1. Entitlement of the assessee to deduction under Section 80P of the I.T. Act:The solitary issue in this appeal is whether the assessee, a registered co-operative society under the Kerala State Co-operative Societies Act, 1969, is entitled to deduction under Section 80P of the I.T. Act for the assessment year 2015-2016. The Assessing Officer denied the deduction, treating the assessee as a co-operative bank rather than a co-operative society.2. Appeal to CIT(A):The assessee appealed to the CIT(A), who allowed the claim for deduction under Section 80P of the I.T. Act, following the judgment of the Hon’ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Ltd. (384 ITR 490).3. Grounds of Appeal by the Department:The Department appealed to the Tribunal, raising several grounds, including:- Reliance on the Supreme Court decision in The Citizens Co-Operative Society Limited Vs Assistant Commissioner of Income Tax.- The CIT(A)'s decision was in contradiction to the full bench of the Hon’ble High Court in ITA No: 97 of 2016 & Ors, which had ruled in favor of the revenue.- The CIT(A)'s reliance on the division bench decision in Chirakkal Service Co-Operative Bank Ltd was erroneous as the full bench had overruled this decision.- The CIT(A) erred in not applying the Apex Court decision in the case of M/s Citizens Co-Operative Society Limited to the instant case of the assessee.- The CIT(A) failed to appreciate that the assessee's operations and income generation from nominal members lacked mutuality.4. Tribunal's Analysis:The Tribunal reviewed the submissions and the material on record. It noted the Larger Bench of the Hon’ble jurisdictional High Court's decision in The Mavilayi Service Cooperative Bank Ltd. v. CIT, which held that the Assessing Officer must conduct an inquiry into the factual situation of the assessee society's activities to determine eligibility for deduction under Section 80P. The High Court emphasized that the Assessing Officer is not bound by the registration certificate issued by the Registrar of Kerala Co-operative Society and must verify eligibility for each assessment year independently.5. Tribunal's Conclusion:In light of the Larger Bench's findings, the Tribunal restored the issue of deduction under Section 80P(2)(a)(i) to the Assessing Officer. The Assessing Officer is directed to examine the activities of the assessee to ascertain compliance with the activities of a co-operative society under the Kerala Co-operative Societies Act, 1969, and grant deduction under Section 80P(2) in accordance with the law.6. Final Order:The appeal filed by the Revenue was allowed for statistical purposes, and the case was remanded to the Assessing Officer for further examination.Order Pronouncement:The order was pronounced on August 7, 2019.