TaxTMI 
TaxTMI 
2019 (5) TMI 1387
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.... Act is entitled for exemption of its entire income under section. 80P(2)(a)(i) of the Act as originally claimed and they cannot be treated as Primary Co-operative Bank so as to invoke the provisions of section 80P(4) of the Act". 2) It is respectfully submitted that the respondent is essentially, a Cooperative bank and not merely a primary agricultural credit society and hence the allowance of deduction u/s 80P to the respondent assessee while computing the total income was irregular in nature and also against law. 3) The present appeal involves substantial question of law: (i) The Ld. CIT(A) ought to have seen that the Hon'ble Supreme Court in the case of in the case of Sabargantha Zilla Kharid Vechar Sangh Ltd. vs. CIT 203 ITR 1027 (SC) has held that eligible deduction u/s. 81(1)(d) (substituted by section 80P by finance Act (No. 2) Act, 1967 w.e.f. 01/04/1968) of the Income Tax Act, 1961 in respect of co-operative societies/banks doing both agricultural and non agricultural activities should not be 100% of the gross profits and gains of business of such societies etc. but would be limited to the profits generated from agricultural activities alone performed by such assess....
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....y claimed to have given loans and advances for both agricultural and non agricultural purposes. The major source of income was interest income earned from loans and advances given both for agricultural and non agricultural purposes. The Assessing Officer denied the claim of deduction u/s. 80P(2)(a)(i) holding that the assessee had been doing banking business rather than getting involved in advancing loan for agricultural activities. 4. On appeal, the CIT(A) held that the issue of eligibility of Primary Agricultural Credit Society to claim deduction u/s. 80P was covered in favour of the assessee by the judgment of the High Court of Kerala in the case of Chirakkal Service Cooperative Bank Ltd. vs. CIT reported in 384 ITR 490 wherein it was held that the assessee being a Primary Agricultural Credit Co-operative Society registered under the Kerala Co-operative Societies Act is entitled for deduction u/s. 80P(2)(a)(i) as originally claimed and accordingly, they cannot be treated as Primary Co-operative Bank so as to invoke the provisions of section 80P(4) of the Act. 5. Against this, the Revenue is in appeal before us. 5.1 The first issue raised by the Revenue is as follows: "2) I....
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....cordingly, the issue in dispute is remitted to the file of the Assessing Officer for fresh consideration in accordance with the above direction. This ground of appeals of the Revenue is partly allowed for statistical purposes. 8. The next issue is with regard to deduction u/s. 80P(2)(a)(i) of the Act. This issue was allowed by the CIT(A) in the light of the order of the Tribunal in the case of Kizhathadiyoor Co-operative Bank Limited for AY 2009-10 in ITA No. 525/Coch/2014, order dated 20.07.2016 wherein it was held that the interest income earned from the investment in Treasury and Banks is part of the banking activity and therefore, the said income is eligible for deduction under section 80P(2)(a)(i) of the Act. 9. Against this, the Revenue is in appeal before us. The Ld. DR relied on the order of the Assessing Officer. 10. We have heard the rival submissions and perused the record. With regard to the interest income earned by the assessee from other Banks and Treasury on which deduction u/s. 80P(2)(i)(a) of the Act is to be granted, there is no dispute that the assessee has made investments in the course of banking activities and such interest income was received on investmen....
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....ncome is exempted from tax since they are a society registered under the Kerala Co-operative Societies Act as Primary Agricultural Credit Society and are eligible for the deduction u/s. 80P as per the judgment of the Jurisdictional High Court in WP(c) 188/2014 dated 15/02/2016 and other connected cases. However, in the absence of satisfactory explanation and details filed by the assessee, the Assessing Officer relying on the decisions of the Supreme Court in the case of A.Govindarajalu Mudaliar vs. CIT and Kale Khan Mohammed Hanif vs. CIT brought to tax the above amount u/s. 68 of the Act as unexplained credits. 12.2 On appeal, the CIT(A) observed that section 68 of the Act provides that where the as offers no explanation about the nature and source of the credits in the books of account, all the amounts so credited or where the explanation offered by the assessee is not satisfactory in relation to it then such credits may be charged to tax as income of the assessee. The conditions that are required to be established by the assessee are the identity of the creditors, genuineness of the transactions and the creditworthiness of the creditors and once the these three essential requir....
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.... The CIT(A) placed reliance on the latest decision of the High Court of Kerala in the case of CIT vs Universal Empire Educational Society (393 1TR 502) wherein the income which was brought to tax u/s 68 of the Ac- in the absence of establishing the identity of the creditors, genuineness of the transactions and the credit worthiness of the creditors was confirmed. 12.3. Against this, the assessee is in appeal before us. 12.4. The Ld. AR submitted that the assessee being a co-operative society, was carrying on the business of providing credit facilities and accepts different kinds of deposits for lending or investment purposes and therefore, the Assessing Officer was not justified in considering these deposits as unexplained cash credit. It was submitted that the Assessing Officer did not make proper enquiries before making the addition u/s. 68 of the Act. He relied on the judgment of Gauhati High Court in the case of Khandelwal Constructions vs. CIT (227 ITR 900) wherein it was held that the assessee being a co-operative society, was keeping proper books of account which were subjected to audit as per Kerala Co-operative Societies Act, 1969 and therefore, there was no undisclosed ....
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.... income under section 68 of the Act held as under: "4. We heard the Senior Counsel for the Revenue and also the learned counsel appearing for the assessee. 5. As we have already noticed in paragraph 7.3 of its order, the Tribunal has confirmed the order passed by the Assessing Officer treating the commodity profit shown by the assessee as unexplained cash credit on the basis that the transactions showing generation of commodity trading profit were sham and bogus transactions without any element of genuineness. The Tribunal also upheld addition of the commodity treating profit as unexplained cash credit under Section 68 of the Act. The question is whether having confirmed the addition of the alleged commodity trading profit as unexplained cash credit under Section 68 of the Act, whether the Tribunal was justified in allowing set off. 6. In our view, answer to this question should be in the negative. This is evident from the judgment of the Gujarat High Court in Fakir Mohammed Haji Hasan (supra) distinguished by the Tribunal itself where it has been held that when income cannot be classified under any one of the heads of income under Section 14, it follows that the question of ....