TaxTMI 
TaxTMI 
TaxTMI 
2018 (12) TMI 63
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.... are directed against three separate orders of the CIT(A). Since common issues are raised in these appeals, they were heard together and disposed off by a consolidated order. 2. The issues raised in these appeals are as follows:- (i) whether the assessee is entitled to deduction u/s. 80P(2)(a)(i) of the I.T.Act? (ii) whether interest expenditure is liable for disallowance u/s 40(a)(ia) of the I.T.Act ? 3. Briefly stated the facts of the case are as follows: The assessees are primary agricultural credit societies registered under the Kerala Cooperative Societies Act, 1969. For the assessment years under consideration, the assessees had filed returns of income after claiming deduction u/s. 80P of the I.T. Act. The assessments u/s. 143....
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....re us. The learned Departmental Representative relied on the grounds raised. The learned Counsel for the assessee, on the other hand, submitted that the issue in question is squarely covered in favour of the assessee by the judgment of the Hon'ble High Court of Kerala in the case of Chirakkal Service Co-op Bank Ltd. reported in 384 ITR 490. As regards disallowance of interest expenditure is concerned, the learned AR submitted that the issue is covered in favour of the assessee by the order of the Tirbunal in the case of Kadachira Service Co-op Bank Ltd. (supra). 6. We have heard the rival submissions and perused the material on record. Admittedly, the assessees are primary agricultural credit societies registered under the Kerala Coope....
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....and its objects have to be understood as those which have been approved by the competent authority under such State law. This, we visualise as due reciprocative legislative exercise by the Parliament recognising 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 K....
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.... that the Tribunal erred in law in deciding the issue regarding the entitlement of exemption under section 80P against the appellants. We hold that the primary agricultural credit societies, registered as such under the KCS Act and classified so, under that Act including the appellants are entitled to such exemption." 6.2 In view of the judgment of the Hon'ble Jurisdictional High Court in the case of Chirakkal Service Co-op Bank Ltd. (supra), we hold that the assessee-societies are entitled to the benefit of deduction u/s. 80P of the Act. It is ordered accordingly. 7. As regards the issue of disallowance of interest u/s 40(a)(ia) of the I.T.Act, we find that the issue is covered in favour of the assessee by the ITAT order in case of K....
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....out the banking activities. Therefore, for all practical purposes, the taxpayers have to be treated as primary agricultural cooperative societies within the meaning of section 2(19) of the Income-tax Act. In view of the above, as found by the jurisdictional High Court, the taxpayers are exempt from deduction of tax at source u/s 194A of the Act. Accordingly, we are unable to uphold the orders of lower authorities. Hence, the orders of lower authorities are set aside and the addition u/s 40(a)(ia) is deleted." 7.1 Further, the Cochin Bench of the Tribunal in a recent order, in the case of ACIT v. Kodungallur Town Co-operative Bank Ltd. [ITA Nos.527-529 & 526/Coch/2017 - order dated 31.05.2018] held that the assessees are not liable to ded....