TaxTMI 
TaxTMI 
2018 (1) TMI 590
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....d brought to tax interest income received from deposits amounting to Rs. 17,71,542 as "income from other sources", thereby denying the benefit of section 80P of the Act. In denying the benefit of section 80P of the Act, the Assessing Officer held that the assessee was primarily not providing any agricultural loans and hence cannot be characterized as a primary agricultural credit society. It was concluded by the A.O. that the assessee was essentially doing the business of banking and hence, in view of insertion of section 80P(4) of the Income-tax Act, 1961, the assessee was not entitled to the benefit of section 80P of the Act. 3. Aggrieved by the assessment order by denying the claim of deduction u/s 80P of the I.T.Act, the assessee has preferred the appeal to the first appellate authority. The CIT(A) following the judgment of the Hon'ble jurisdictional High Court in the case of Chirakkal Service Co-operative Bank Limited v. CIT reported in 384 ITR 490 (Ker.), directed the Assessing Officer to grant deduction u/s 80P(2) of the Act. 3.1 As regard the interest received from FD amounting to Rs. 17,71,542, the CIT(A) held that the assessee is entitled to the deduction u/s 80P(2)....
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.... 80P(2)(a)(i) of the Act"." 4. Aggrieved by the order of the CIT(A), the Revenue has filed the present appeal raising the following grounds:- "The order of the learned Commissioner of Income tax (Appeals), Kottayam in so far as the points stated below are concerned, is opposed to law on the facts and in the circumstances of the case. 2. The Ld. Commissioner of Income Tax (Appeals) has erred in allowing deduction u/s 80P(2)(a)(i) of the Act in respect of business income of Rs. 1,88,13,979/ - assessed for the year under consideration. 3. The Ld CIT (A) ought to have considered the decision of the jurisdictional High Court in the case of Perinthalmanna Service Co-operative Bank (363 ITR 268) wherein it has been held that with the introduction of section 80P(4) of the Act, deduction u/s 80P (2) cannot be allowed merely on the strength of certificate of registration as "Primary Agricultural Credit Society" . 4. The Ld. CIT (A) has erred in holding that the interest income of Rs. 17,71,542/ - earned on fixed deposit with Federal Bank, Urban Co-operative Bank, etc. cannot be separately assessed under "Income from Other Sources". 5. The Ld. C....
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....ciety' by the competent authorities under the provisions of the Kerala Cooperative Societies Act, 1969. For these and other grounds that may be advanced at the time of hearing, the order of the learned Commissioner of Income tax (Appeals) on the above points may be set aside and that of the Assessing Officer restored." 4.2 The learned Departmental Representative has also filed a brief written submission, which is reproduced below for ready reference:- "In the case of the Valavoor Service Co-op Bank Ltd., out of the total loan sanctioned, only the following percentage given for agricultural purpose. Return filed A.Y. Percentage 17.06.2013 2012- 2013 81.16% (As per assessee) 55.91% (as per A.O. - refer para 2.13) Hence the Assessing Officer denied the exemption claimed u/s 80P(2). The CIT(A) deleted the 80P disallowance relying on the decision of the Hon.Kerala High Court in the case of M/s.Chirakkal Service Co-operative Bank Ltd. vs. CIT. Reliance is placed on the Hon.Supreme Court judgment reported in 203 ITR 1027 - case of Sabarkantha Zilla Kharid Vechan Sangh vs. CIT (held - what was deductible u/s 80P(1) was o....
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....he registration of a society under any State law relating to co-operative societies for the time being; it cannot but be taken that the purpose of the societies so registered under the State Law and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualize as due reciprocative legislative exercise by the Parliament recognizing the predominance of decisions rendered under the relevant State Law. In this view of the matter, all the appellants having been classified as primary agricultural credit societies by the competent authority under the KCS Act it has necessarily to be held that the principal object of such societies is to undertake agricultural credit activities and to provide loans and advances for agricultural purposes; the rate of interest on such loans and advances to be at the rate fixed by the Registrar of co-operative societies under the KCS Act and having its area of operation confined to a village, panchayat or a municipality. This is the consequence of the definition clause in section 2(oaa) of the KCS Act. The authorities under the IT Act cannot probe into any issue or such matter relating ....