2020 (6) TMI 168 - AT - Income Tax

Tribunal grants appeal for cooperative society's tax deduction eligibility under Income Tax Act

The Tribunal allowed the appeal filed by the cooperative society for statistical purposes, emphasizing the need for a detailed examination of the ... Deduction u/s 80P - disallow the claim as that the assessee was doing the business of banking, and in view of insertion of section 80P(4) with effect from 01.04.2007 - CIT(A) passed order u/s 154 wherein the claim of deduction u/s 80P was denied - HELD THAT:- The Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT [2019 (3) TMI 1580 - KERALA HIGH COURT] had held that the A.O. 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 Thus restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. In this case, the A.O. had concluded that out of the total loan disbursed by the assessee only 12.54% are for agricultural purpose / allied activities. I am of the view that the above finding of the A.O. is not conclusive unless each loan applications / loan ledger are verified and the A.O. AO shall examine the activities of the assessee afresh and determine whether the activities are in compliance with the activities of a co-operative society functioning under the Kerala Co-operative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) - Appeal filed by the assessee allowed for statistical purposes. Issues:1. Disallowance of deduction u/s 80P of the I.T.Act by Assessing Officer.2. Appeal to CIT(A) and subsequent rectification order u/s 154.3. Interpretation of judgments by jurisdictional High Court.4. Rejection of deduction u/s 80P(2) by CIT(A) without proper examination.5. Restoring the issue of deduction u/s 80P(2) to the Assessing Officer for re-examination.Analysis:1. The Assessing Officer disallowed the claim of deduction u/s 80P of the I.T.Act for the co-operative society, citing the insertion of section 80P(4) from 01.04.2007. The CIT(A) initially allowed the appeal based on the judgment of the Hon'ble High Court. However, a subsequent notice u/s 154 was issued by CIT(A) to rectify the order based on a Full Bench judgment, leading to disallowance of the deduction. The Tribunal dismissed the grounds raised by the assessee against the order of CIT(A) under section 154.2. The Hon'ble Kerala High Court judgments in the cases of Chirakkal Service Co-operative Co-operative Bank Ltd. and The Mavilayi Service Co-operative Bank Ltd. were crucial in determining the eligibility of deduction u/s 80P of the I.T.Act. The Larger Bench reversed the earlier findings and emphasized the need for an inquiry into the activities of the assessee society for each assessment year. The Tribunal held that the CIT(A) erred in rejecting the deduction without proper examination of the activities.3. The Full Bench of the Hon'ble jurisdictional High Court in The Mavilayi Service Co-operative Bank Ltd. v. CIT highlighted the necessity for the Assessing Officer to conduct a detailed inquiry into the factual situation regarding the activities of the assessee society to determine the eligibility for deduction u/s 80P. The Tribunal directed the Assessing Officer to re-examine the activities of the assessee to ensure compliance with the requirements of a co-operative society under the Kerala Co-operative Societies Act, 1969 for granting deduction u/s 80P(2) of the I.T.Act.4. The Tribunal, in light of the legal precedents and judgments, allowed the appeal filed by the assessee for statistical purposes. The decision emphasized the importance of a thorough examination of the activities of the co-operative society to ascertain the eligibility for deduction u/s 80P of the I.T.Act. The order pronounced on June 5, 2020, reflected the Tribunal's decision to restore the issue of deduction u/s 80P(2) to the Assessing Officer for re-evaluation.