2020 (10) TMI 409 - AT - Income Tax

Tribunal directs fresh assessment for Section 80P(2) deduction eligibility.

M/s. Enadimangalam Service Co-operative Bank Limited Versus The Income Tax Officer Ward (4) Kollam

M/s. Enadimangalam Service Co-operative Bank Limited Versus The Income Tax Officer Ward (4) Kollam - TMI Issues Involved:1. Delay in filing the appeal.2. Denial of deduction under Section 80P(2)(a)(i) of the Income Tax Act.3. Eligibility criteria for deduction under Section 80P(2)(a)(i) and 80P(4) of the Income Tax Act.4. The impact of judicial precedents on the case.5. Requirement for detailed examination by the Assessing Officer.Detailed Analysis:1. Delay in Filing the Appeal:The appeal filed by the assessee was delayed by 93 days. The assessee explained that the delay was due to being unaware of the required actions post-receipt of the CIT(A) order and subsequent advice from the Chartered Accountant to engage another counsel. The Tribunal found the explanation reasonable, noting that the facts in the affidavit were not proven false. Consequently, the delay was condoned, allowing the appeal to be disposed of on merits.2. Denial of Deduction under Section 80P(2)(a)(i) of the Income Tax Act:The primary issue was whether the CIT(A) was justified in confirming the Assessing Officer’s order denying the claim of deduction under Section 80P(2)(a)(i). The Assessing Officer disallowed the deduction, reasoning that the assessee was engaged in banking business, thus ineligible for the deduction under Section 80P(4) introduced from 01.04.2007.3. Eligibility Criteria for Deduction under Section 80P(2)(a)(i) and 80P(4):The CIT(A) upheld the Assessing Officer’s decision, relying on the Full Bench judgment of the Hon’ble Kerala High Court in Mavilayi Service Co-operative Bank Ltd. v. CIT. The judgment stated that the Assessing Officer must conduct a factual inquiry into the activities of the society to determine eligibility for deduction under Section 80P, rather than relying solely on the registration certificate.4. Impact of Judicial Precedents:The Tribunal noted the conflicting judgments: the earlier Chirakkal Service Co-operative Co-operative Bank Ltd. v. CIT, which favored the assessee, and the later Mavilayi Service Co-operative Bank Ltd. v. CIT, which required a detailed inquiry by the Assessing Officer. The Tribunal emphasized that the Assessing Officer must examine the factual situation of each loan disbursement to determine whether it was for agricultural purposes, as per the Mavilayi judgment.5. Requirement for Detailed Examination by the Assessing Officer:The Tribunal observed that the Assessing Officer had not conducted a detailed examination of each loan disbursement to determine its purpose. The judgment in Chirakkal was prevailing at the time of assessment, which did not necessitate such an examination. However, following the Mavilayi judgment, a fresh examination was required. The Tribunal restored the issue to the Assessing Officer to examine the activities of the assessee-society in compliance with the Kerala Co-operative Societies Act, 1969, and decide the eligibility for deduction under Section 80P(2).Conclusion:The Tribunal allowed the appeal for statistical purposes, directing the Assessing Officer to conduct a fresh examination of the assessee’s activities and determine the eligibility for deduction under Section 80P(2) in accordance with the Mavilayi judgment. The order was pronounced on October 7, 2020.