TaxTMI 
TaxTMI 
2020 (4) TMI 758
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....erala Co-operative Societies Act, 1969. For the assessment year under consideration, the return of income were filed after claiming deduction u/s 80P of the I.T.Act. The Assessing Officer passed order, 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. 4. Aggrieved by the order of assessment denying the claim of deduction u/s 80P(2) of the I.T.Act, the assessee preferred appeal 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 High Court in the case of Chirakkal Service Cooperative Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 ....
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....efit of Sec. 80P(2)(a)(i) of the Act. This aspect was not considered by the authorities below in the proper perspective. D. As per the dictum laid down by the Hon 'ble Supreme Court in COMMISSIONER OF INCOME TAX vs. NAWANSHAHAR CENTRAL COOPERATIVE BANK LTD. (2007) 289 ITR 6 (SC) held that investments made by a banking concern are part of the business of banking. The income arising from such investments would, therefore, be attributable to the business of bank falling under the head "Profits and gains of business" and thus deductible under Section. 80P(2)(a)(i) of the Income Tax Act. It was also held that the said principle would cover a situation where a co-operative bank carrying on the business* of banking is statutorily required to place a part of its funds in approved securities. So, the interest on deposit is a part of business of banking and the same is deductible Sec. 80P(2)(a)(i) of the Act. Without considering this aspect, the benefit available Sec. 80P(2)(a)(i) of the Act has been denied. E. Section 80P(2(d) of the Income Tax Act provides for deduction in respect of any income by way of interest or dividend derived by a cooperative society from its investment in....
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.... (1) of the said Act read that "Member" means a person joining in the application for the registration of a co-operative society or a person admitted to membership after such registration in accordance with this Act, the Rules and the Bye law and includes a nominal or associate member" The 'normal member' is defined under 2(M) of the KCS Act, which reads that a 'nominal or associate member' means a member who possesses only such privileges and rights of a member and who is subject only to such liabilities of a member as may be specified in the bye-laws;" Hence, the nominal members are also the members of the society in accordance with the provisions itself and the deposits from such nominal members cannot be considered as deposits from the non-members or from public. In short, the deposits form nominal members cannot be said that deposits from nonmembers, since, the nominal members are also members of the society in accordance with the KCS Act and Rules and the approved byelaw of the society. Hence, the order issued by the assessing authority and also the appellate authority are not legal and the same are liable to be set aside. I. In Mavilayi's case. the Ho....
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....ble for deduction ii] s 80P of the Income Tax Act 1961 in the light of the clarification No.133/06/2006-07 dated 19-05-2007 issued by CBDT, New Delhi, which is binding on the Assessing Officer. M. When there is large number of decisions of various High Courts and ITATs in India in which detailed discussions were made and conclusion arrived on the subject matter of eligibility for deduction u/s 80P, disallowance of claim under the said Section made by the Assessing Officer and the C.I.T. (Appeals) relying on unrelated decisions is denial of natural justice to the appellant. Hence, the finding of the assessing authority as well as the appellate authority are bad in law. N. The decisions of various High courts and ITATs across the country on the disallowance of claim for deduction under section 80(P), adopted on the basis of CBDT clarification No.133/06/2006-07 dated 19-05-2007 has to be considered by the authorities in the proper perspective. But, the authorities under the statute proceeded the matter with a predetermined view and declined the benefit of Section 80P of the Act. So, the impugned orders issued by the assessing authority as well as the appellate authority may be i....
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....ued 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. 33. In Chirakk....
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....s eligible in the initial years." 8.2 The CIT(A) had initially allowed the appeals of the assessee and granted deduction u/s 80P(2) of the I.T.Act. Subsequently, the CIT(A) passed orders u/s 154 of the I.T.Act, wherein the claim of deduction u/s 80P of the I.T.Act was denied, by relying on the judgment of the Larger Bench of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT (supra). The CIT(A) ought not to have rejected the claim of deduction u/s 80P(2) of the I.T.Act without examining the activities of the assesseesociety. The Full Bench of the Hon'ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. V. CIT (supra) had held that the A.O. has to conduct an inquiry into the factual situation as to the activities of the assessee society to determine the eligibility of deduction u/s 80P of the I.T.Act. In view of the dictum laid down by the Full Bench of the Hon'ble jurisdictional High Court (supra), we restore the issue of deduction u/s 80P(2) to the files of the Assessing Officer. The Assessing Officer shall examine the activities of the assessee and determine whether the activities are in c....