TaxTMI 
TaxTMI 
2019 (5) TMI 1192
X X X X Extracts X X X X
X X X X Extracts X X X X
.... deduction u/s 80P of the I.T.Act. The Assessing Officer denied the claim of deduction u/s 80P of the I.T.Act for the reason that the activities of the assessee are that of a co-operative bank and not that of primary agricultural credit society. Secondly, the Assessing Officer held that the interest income received by the assessee on investments should be assessed as `income from other sources' instead of `income from business' claimed by the assessee, thereby denying the claim of deduction u/s 80P(2) of the I.T.Act. 4. Aggrieved by the assessment order, the assessee preferred an 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 Ltd. (384 ITR 490) held that the assessee being registered as a primary agricultural credit society, was entitled to deduction u/s 80P(2) of the I.T.Act. As regards the interest income received by the assessee on investments, the CIT(A) held that these are investments made in the course of banking activities of the assessee and should be assessed as income from business, thereby granting deduction u/s 80P(2) of the I.T.Act on such interest....
X X X X Extracts X X X X
X X X X Extracts X X X X
....SC), wherein it has been held that if a cooperative society is violating the principle of mutuality in the grab of persons who actually are not real members and indulging in banking business per se that it cannot claim the benefit of section 80P(2)(a)(i). (vi) Whether on the facts and in the circumstances of the case, the order of CIT(A) is correct in not duly considering following case laws: (a) 203 ITR 1027 (SC) in the case of Sabargantha Zilla Kharid Vechar Sangh Ltd. (b) 363 ITR 68(Kerala) in the case of Perunthalmanna Service Corporative Bank. (c) 234 ITR 201 (Kerala) in the case of CIT V s Kerala State Co-operative Marketing Federation (d) 322 ITR 283 in the case of M/s Totgars Cooperative Sales Society. For these and other grounds that may be advanced at the time of hearing the order of the learned Commissioner of Income-tax (Appeals), Trivandrum on the above points may be set aside and that of the Assessing Officer restored." 6. The learned Departmental Representative relied on the grounds raised and the latest judgment of the Larger Bench of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2019. 5. Hon'ble Larger Bench held that: 5.1. The assessing officer has to conduct an enquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P or denial of benefit u/s 80P(4). The Assessing officer shall not merely rely on the registration certificate. 5.2. Since each assessment year is separate, the eligibility shall be verified each year. 6. Para 6 of the Order of the Larger Bench discusses the issues the Hon'ble Bench propose to consider. The Larger Bench deem it appropriate to consider only the question referred to the Full Bench and did not consider the various contentions raised on merits. The Hon'ble Larger Bench of High Court of Kerala did not expressed opinion about the eligibility for deduction u/s 80P rather decided about the power of the Assessing Officer to verify the facts in each year. 7. In Para 12, 13 and 14, the Hon'ble Bench discusses about the provisions of KCS Act and observe that w.e.f 28/04/2010, once the principal object is not fulfilled by a PACS, such society shall loose the characteristics of a PACS. The Bench finally obser....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1949 (BR Act). As per Section 5 (cei) of BR Act: "Co-operative bank" means a state co-operative bank.a central co-operative bank and a primary co-operative bank. As per Section 5 (ccvii) of BR Act: "central co-operative bank", "primary rural credit society" and "state co-operative bank" shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981.(NABAKD Act). 13.1. As per NABARD Act, Section 2 (u): State co-operative bank means the principal co-operative society in a State, the primary object of which is the financing of other co-operative societies in the State. 13.2. As per NABARD Act, Section 2 (u): Central co-operative bank means the principal Co-operative Society in a district in a State, the primary object of which is the financing of other co-operative societies in that district. 13.3. The third entity included in the definition of "cooperative bank" is 'Primary cooperative bank'. As per Section 5 (ccv) of BR Act: "primary co-operative bank" means a co-operative society, other than a primary agricultural credit society,- (l)the primar....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deduction u/s 80P. 15.2. Hon'ble Karnataka High Court in the case of Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot [ITA No. 5006/2013, Order dated 05/02/2014]. • cooperative societies which do not possess the license from Reserve Bank of India are not cooperative banks. A cooperative carrying on the business of providing credit facilities to its members is eligible for deduction u/s 80P. 15.3. Hon'ble High Court of Bombay at Goa in the case of The Quepem Urban Cooperative Credit Society Ltd [Tax Appeals No. 22,23 & 24 of 2015, Order dated 17/04/2015]. • If all the three conditions mentioned in the definition of "primary cooperative bank' is not satisfied cumulatively" a cooperative society cannot be treated as a primary cooperative bank and in turn a cooperative bank. 16. The interest income received from Deposits with cooperative banks and others is to be treated as income from business. This view was upheld by Hon'ble IT AT, Cochin Bench in the case of M/s. Postal Telecom BSNL Employees Cooperative Society Ltd.in ITA 68 to 72/COCH/2019, order dated 30/04/2019. 7. We have heard the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ans and advances to be at the rate to be 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 and as such, they are entitled for the benefit of sub-section (4) of Section 80P of the IT Act to ease themselves out from the coverage of Section 80P and that, the authorities under the IT Act cannot probe into any issues or such matters relating to such societies and that, Primary Agricultural Credit Societies registered as such under the KCS Act and classified so, under the Act, including the appellants are entitled to such exemption. 34. In Chirakkal [384 ITR 490] the Division Bench expressed a divergent opinion, without noticing the law laid down in Antony Pattukulangara [2012 (3) KHC 726] and Perinthalmanna [363 ITR 268]. Moreover, the law laid down by the Division Bench in Chirakkal [384 ITR 490] is not good law, since, in view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1], on a claim for deduction under Section 80P of the Income Tax Act, by reason of sub-section (4) thereof, the Assessing Officer has to conduct an enquiry into the factual s....