Appeal delay condoned, deductions under Section 80P allowed post rectification. Tribunal directs factual inquiry.

The Tribunal condoned the delay in filing the appeal and allowed it to proceed on its merits. The assessee's claim for deductions under Section 80P(2) of the Income Tax Act was initially allowed by the CIT(A) but later disallowed after rectification under Section 154, following the Full Bench judgment. The Tribunal directed the Assessing Officer to examine the activities of the assessee society to determine eligibility for deductions under Section 80P, emphasizing the need for a factual inquiry in line with the Kerala High Court's Full Bench judgment.

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Issues Involved:
1. Condonation of delay in filing the appeal.
2. Eligibility for deduction under Section 80P(2) of the Income Tax Act.
3. Applicability of Section 80P(4) of the Income Tax Act.
4. Rectification of the order under Section 154 of the Income Tax Act.
5. Examination of the activities of the assessee society for determining eligibility for deduction.
6. Interest income from investments with cooperative banks and other banks.

Detailed Analysis:

1. Condonation of Delay in Filing the Appeal:
The Tribunal acknowledged a delay of 60 days in filing the appeal. The assessee provided a petition and an affidavit explaining the reasons for the delay. After reviewing the reasons, the Tribunal found sufficient cause for the delay and condoned it, allowing the appeal to proceed on its merits.

2. Eligibility for Deduction under Section 80P(2) of the Income Tax Act:
The assessee, a co-operative society, claimed deductions under Section 80P(2) of the Income Tax Act. The Assessing Officer disallowed this claim, stating that the assessee was engaged in banking activities and thus ineligible for the deduction due to the insertion of Section 80P(4) effective from 01.04.2007. The CIT(A) initially allowed the deduction, referencing the Kerala High Court's decision in Chirakkal Service Cooperative Co-operative Bank Ltd. v. CIT.

3. Applicability of Section 80P(4) of the Income Tax Act:
The CIT(A) later issued a notice under Section 154 to rectify its order based on the Full Bench decision of the Kerala High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT, which reversed the earlier judgment. This decision required an examination of the activities of the society to determine eligibility for deduction under Section 80P(2).

4. Rectification of the Order under Section 154 of the Income Tax Act:
The CIT(A) rectified its order under Section 154, disallowing the deduction by relying on the Full Bench judgment. The Tribunal upheld this rectification, noting that the Larger Bench judgment necessitated an inquiry into the activities of the assessee society to determine eligibility for the deduction.

5. Examination of the Activities of the Assessee Society:
The Tribunal emphasized that, per the Full Bench judgment, the Assessing Officer must conduct an inquiry into the factual situation of the assessee's activities to determine eligibility for the deduction under Section 80P. The Tribunal restored the issue to the Assessing Officer to examine whether the assessee's activities complied with those of a co-operative society under the Kerala Co-operative Societies Act, 1969, and accordingly grant the deduction.

6. Interest Income from Investments with Cooperative Banks and Other Banks:
Regarding interest income from investments, the Tribunal referred to its earlier decision in Kizhathadiyoor Service Cooperative Bank Limited, which held that such income is part of the banking activity and should be assessed as 'income from business'. However, for granting deduction under Section 80P on such interest income, the Assessing Officer must follow the Full Bench judgment and examine the assessee's activities. The Assessing Officer should also consider the eligibility for deduction under Section 80P(2)(d) if facts are available on record.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to examine the activities of the assessee and determine eligibility for deductions under Section 80P in compliance with the Full Bench judgment of the Kerala High Court. The Tribunal emphasized the need for a factual inquiry into the assessee's activities for each assessment year to determine eligibility for the claimed deductions.

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