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of <h1>Assessee's appeals allowed for examination of cooperative society activities for tax deductions under</h1> <h3>M/s. The Chombal Service Co-operative Bank Limited Versus The Income Tax Officer Ward -2 (2) Kozhikode.</h3> M/s. The Chombal Service Co-operative Bank Limited Versus The Income Tax Officer Ward -2 (2) Kozhikode. - [2020] 81 ITR (Trib) 13 (ITAT [Coc]) Issues Involved:1. Disallowance of deduction u/s 80P of the I.T.Act by Assessing Officer.2. Appeal to CIT(A) and subsequent rectification u/s 154 by CIT(A).3. Grounds raised by the assessee against the order of CIT(A).4. Interpretation of judgments by Hon'ble Kerala High Court.5. Examination of activities of the assessee society for eligibility of deduction u/s 80P.6. Treatment of interest income from investments with Cooperative Banks and other Banks.Analysis:1. The Assessing Officer disallowed the claim of deduction u/s 80P(2) of the I.T.Act for the assessee, a co-operative society engaged in banking activities, citing the insertion of section 80P(4) from 01.04.2007. The CIT(A) initially allowed the deduction based on the judgment of the Hon'ble jurisdictional High Court in a similar case.2. Subsequently, the CIT(A) issued a notice u/s 154 proposing to rectify the order based on a subsequent judgment of the Full Bench of the Hon'ble jurisdictional High Court. Despite objections from the assessee, the CIT(A) passed an order disallowing the deduction u/s 80P(2) of the I.T.Act, leading to the appeal before the Tribunal.3. The assessee raised multiple grounds challenging the rectification order, arguing against the applicability of the subsequent judgment on the previous decision. The Tribunal proceeded with the appeal after hearing the Departmental Representative, who supported the Income-tax authorities' orders.4. The Tribunal referred to judgments of the Hon'ble Kerala High Court, highlighting the reversal of earlier decisions regarding the classification of the assessee as a cooperative society or cooperative bank. The Larger Bench emphasized the need for an inquiry into the activities of the assessee society for determining eligibility under section 80P.5. The Tribunal directed the Assessing Officer to examine the activities of the assessee society to ascertain compliance with the Kerala Co-operative Societies Act, 1969, before granting deduction u/s 80P(2) of the I.T.Act. The restoration of the issue to the AO was based on the dictum laid down by the Full Bench of the Hon'ble jurisdictional High Court.6. Regarding interest income from investments with Cooperative Banks and other Banks, the Tribunal instructed the AO to follow the law laid down by the Larger Bench of the Hon'ble jurisdictional High Court in determining the eligibility for deduction u/s 80P of the I.T.Act. The treatment of such interest income was to be based on a thorough examination of the activities of the assessee-society.In conclusion, the appeals filed by the assessee were allowed for statistical purposes, emphasizing the need for a detailed assessment of the activities of the assessee society for determining eligibility for deductions under section 80P of the I.T.Act.
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