TaxTMI 
TaxTMI 
TaxTMI 
2020 (1) TMI 295
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....fter claiming deduction u/s 80P of the I.T.Act. The Assessing Officer passed an orders u/s 143(3) r.w.s. 147/144 of the I.T.Act, disallowing the claim of deduction u/s 80P of the I.T.Act. The reasoning of the Assessing Officer to disallow the claim of deduction u/s 80P(2) of the I.T.Act was that the assessee was doing the business of banking, and therefore, in view of insertion of section 80P(4) of the I.T.Act with effect from 01.04.2007, the assessee will not be entitled to the deduction u/s 80P(2) of the I.T.Act. The Assessing Officer also disallowed the claim of deduction with regard to interest income received by the assessee on investments made with District Co-operative Banks. 3. Aggrieved by the orders of assessment denying the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred an appeals to the first appellate authority. The CIT(A) allowed the appeals by holding that the assessee was eligible for deduction u/s 80P of the I.T.Act. The interest income received from other banks and treasury also was allowed as deduction u/s 80P(2)(a)(i) of the I.T.Act. In allowing the appeals of the assessee, the CIT(A) followed the judgment of the Hon'ble jurisdictional Hig....
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....ety Own Loan) d. Gold Loan and Gold Agriculture Loan e. Employees Housing Loan f) Majority of these advances, other than the employee's loans were given to the farmers who were members of the society for Agricultural and Rural development purpose. The society assists its members for meeting their requirements of Agriculture operations, startup of small business units and other rural development activities. MTNL and CSOL were categorized based on the repayment schedule. This can be verified from the Loan Register, Loan Application and allotment Letter and from the by-laws of the society. g) The society is situated in a place/Village mostly inhabited by agriculturists. Since the area of operation of the bank is also restricted by bye-laws, the society can lend mostly to agriculturists only and not to others. A major portion of the advances by the society is classified in general category. A general category loan taken by an agriculturist will be for agricultural purpose only, though it gets classified under other heads due to technical reasons. The observation by the Assessing officer in this regard is that the agricultural finance by the society is only a small percentag....
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....at the activity of the appellant is in violation of the Co-operative Societies Act. Moreover, it is a Co-operative Credit Society, which is not entitled to deduction under section 80P(2)(a)(1) of the Income Tax Act. It is in this background, a specific finding is also rendered that the principle of mutuality is missing in the instant case. In the assessment order, the assessing officer found that the assessee failed to satisfy the test of mutuality at the time of making payments. There is detailed discussion in this behalf in the order of the assessing officer. The Apex Court found that those findings of facts have remained unshaken till the stage of the High Court. Once the aforesaid aspects are kept in mind the conclusion is obvious that the appellant assessee cannot be treated as a Co-operative Society meant only for its members and providing credit facility to its members. Therefore, the Apex Court held that the appellant society cannot claim the benefit under section 80P of the Income Tax Act". The appellant case the credit facilities were extended only to the members who lives in a specified area, which is the operating territory of the Appellant hence principles of mutuali....
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....rom 01.04.2007, the provisions of Sec. 80P would not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank, but however, are unable to subscribe to their view that the same shall also jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of the interest income on their investments parked with a co-operative bank. We have given a thoughtful consideration to the issue before us and are of the considered view that as long as it is proved that the interest income is being derived by a cooperative society from its investments made with any other co-operative society, the claim of deduction under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We may herein observe that the term "co-operative society" had been defined under Sec. 2(19) of the Act, as under:- "Co-operative society" means a cooperative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;" We are of the considered view....
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....ment Bank, would not alter the pre-existing situation. Hence, interest earned on the deposits made with RRB would be allowed as deduction under section 80P". Based on the above judicial decisions the appellant is eligible to get exemption for its investment income from deposits with other cooperative societies. 4. For the above grounds and in light of the above mentioned judicial decisions the disallowance under appeal may kindly be deleted." 5.1 The assessee has also raised additional grounds stating therein that the CIT(A) has erred in invoking the provisions of section 154 of the I.T.Act on a debatable issue. In support of the additional grounds, the learned AR had relied on the judgment of the Hon'ble Apex Court in the case of Mepco Industries Ltd. (Civil Appeal Nos.7662-7663 of 2009) wherein it was held that the provisions of section 154 of the I.T.Act can be invoked only in cases where there is a "mistake apparent from record". 6. The learned AR relied on the grounds raised. The learned Departmental Representative, on the other hand, strongly supported the orders of the Income-tax authorities. 7. We have heard the rival submissions and perused the material on record.....
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....ed 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 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....
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....erative Societies Act, 1969 and accordingly grant deduction u/s 80P(2) of the I.T.Act. 7.2 As regards the interest on the investments with Cooperative Banks and other Banks, the co-ordinate Bench order of the Tribunal in the case of Kizhathadiyoor Service Cooperative Bank Limited in ITA No.525/Coch/2014 (order dated 20.07.2016), had held that interest income earned from investments with treasuries and banks in the course of assessees business is part of banking activity of the assessee, and therefore, the said interest income was eligible to be assessed as `income from business' instead of `income from other sources'. However, as regards the grant of deduction u/s 80P of the I.T.Act on such interest income, the Assessing Officer shall follow the law laid down by the Larger Bench of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) and examine the activities of the assessee-society before granting deduction u/s 80P of the I.T.Act on such interest income. 7.3 As regards the additional grounds are concerned, the Hon'ble Kerala High Court in the case of Kil Kotagiri Tea & Coffee Estates Co. Ltd. v. ITAT reported in 174 ITR....