AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 597
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....The assessee is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. For the assessment years 2010-2011 and 2014-2015, `Nil' returns were filed after claiming deduction u/s 80P of the I.T.Act. The assessment orders were passed for assessment years 2010- 2011 and 2014-2015, wherein the Assessing Officer disallowed part of claim of deduction u/s 80P of the I.T.Act. The A.O. allowed deduction u/s 80P of the I.T.Act only proportionately to the extent of agricultural loan disbursed by the assessee. The reasoning of the Assessing Officer to disallow a portion of the claim of deduction u/s 80P(2)(a)(i) of the I.T.Act was that the assessee was essentially 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 deduction u/s 80P of the I.T.Act in respect of disbursement of non-agricultural loan. The relevant finding of the Assessing Officer for assessment year 2010-2011 reads as follow:- "27. Summing up the above discussions above, following facts emerge:- (1) The assessee has claimed deduction u/s.80P of the Income Tax Act, 19....
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....ing licence as per the definition under the Income Tax Act for carrying on banking business. If licence is not obtained it may an illegal banking business under the other statute." Since the activities of the assessee Primary Agricultural Credit Society, other than providing financial accommodation only to its members and that too for agricultural purposes and purposes connected with agricultural activities, is not permissible, in view of Hon'ble Kerala High Court's decision in Muhammed Usman vs Registrar Of Co-Operative supra and affirmed by the decision in Cherukode Co-Op. Rural Bank Ltd. vs Parur Service Co-Op. Bank supra, in view of Explanation to Section 37 (1) of the Income Tax Act, 1961, no any expenditure is allowable in the case of assessee. (9) In view of decision of the Hon. Kerala High Court in the case of The Chirakkal Service Cooperative Bank Ltd. Vs. The CIT (ITA No.212 of 2013, since the by laws of the assessee cooperative society does not contain any prohibitory clause for admission of other cooperative societies and the by-laws itself allows admission of Self Helf Groups, Kudumbasree etc., which can also be registered as Cooperative Societies, the assessee....
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....e it clear why the CBDT circular and the related decisions were not binding on the Assessing Officer while passing the assessment order. Some of the decisions of appellate authorities on applicability of Section 80P/80P(4) are given below:- (a) High Court of Karnataka in Bangalore Commercial Transport Credit Society Ltd - ITA NO: 598/2013 dated 27-06-2014 (b) High Court of Gujarat - Jafari Momin Vikas Coop. Credit Society Ltd. in Tax Appeals no. 442 of 2013,443 of 2013 and 863 of 2013 on 15-01-2014 (c) High Court of Karnataka - Income Tax Officer Vs Sri Biluru Gurubasava Pattina Sahakari Sangha Niyamitha Bagalkot on 5th Feb 2014 (d) High Court of Bombay at Goa - Quepem Urban Co-operative Credit Society Ltd. vs Assistant Commissioner of Income-tax on 17-04-2015 (e) Madras High Court - The Commissioner of Income Tax vs NIC Employees Co-Operative Society on 10 August, 2016 (f) ITAT, Panaji - Athani Taluka primary teachers Co-operative credit society Ltd. ITA No. 06/PNJ/2014 on 04-07-2014 (g) ITAT, Poona - Jankalyan Nagri Sahakari Pat Sanstha Ltd. reported in 24 Taxmann.com (Pune Tribunal) 127 (h) ITAT, Ahamadabad ....
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....sioner (Appeals) are misconceived. Since CBDT had clarified that a co-operative society is eligible for deduction u/s 80P if it is not a Co-operative Bank as defined in Part V of the Banking Regulation Act 1949 and High Courts all over India have adopted the same view, the only thing to be enquired by the Assessing Officer in view of the order in Mavilayi (supra) is limited to the extend to find out whether the Appellant is a co-operative Bank or not. Appellant, not being a Co-operative Bank, is eligible for deduction u/s 80P as defined in Part V of the Banking Regulation Act 1949. Commissioner (Appeals) failed to verify the veracity of the Assessment order as if the final authority to decide the allowability of deduction u/s 80P is the Assessing Officer, by virtue of the order in the Mavilayi case (supra) and therefore the appellate order is liable to be quashed. E. Appellant is not a Co-operative Bank in as much as appellant is not a State Co-operative Bank or a Central Co-operative Bank or a Primary Co-operative Bank. Since appellant receives deposits from the members only the primary object or principal business of the appellant cannot be treated as Banking. F....
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.... issued by the Registrar of Kerala Co-operative Society classifying the assessee-society as a co-operative society. The Hon'ble High Court held that each assessment year is separate and eligibility shall be verified by the Assessing Officer for each of the assessment years. The finding of the Larger Bench of the Hon'ble High Court reads as follows:- "33. In view of the law laid down by the Apex Court in Citizen Co-operative Society [397 ITR 1] it cannot be contended that, while considering the claim made by an assessee society for deduction under Section 80P of the IT Act, after the introduction of sub-section (4) thereof, the Assessing Officer has to extend the benefits available, merely looking at the class of the society as per the certificate of registration issued under the Central or State Co-operative Societies Act and the Rules made thereunder. On such a claim for deduction under Section 80P of the IT Act, the Assessing Officer has to conduct an enquiry into the factual situation as to the activities of the assessee society and arrive at a conclusion whether benefits can be extended or not in the light of the provisions under sub-section (4) of Section 80P....
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.... which the deduction is provided, even if it was eligible in the initial years." 7.1 In the instant case, the Assessing Officer had denied a portion of claim of deduction u/s 80P of the I.T.Act for the reason that assessee was essentially doing the business of banking and disbursement of agricultural loans by the assessee was only minuscule. Therefore, the Assessing Officer concluded to the extent of the disbursement of agricultural loan alone, assessee is entitled to deduction u/s 80P(2) of the I.T.Act. The Assessing Officer after perusing the narration of the loan extracts for the financial period 2009-2010 and 2013-2014, came to the conclusion that out of the total loan disbursement, only a minuscule portion has been advanced for agricultural purposes. The narration in loan extracts / audit reports by itself may not conclusive to prove whether loan is a agricultural loan or a non-agricultural loan. The gold loans may or may not be disbursed for the purpose of agricultural purposes. Necessarily, the A.O. had to examine the details of each loan disbursement and determine the purpose for which the loans were disbursed, i.e., whether it is for agricultural purpose or non-agricult....