TaxTMI 
TaxTMI 
2020 (12) TMI 843
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....] filed by the Cooperative Societies in Kerala, against the reference order dated 19/03/2019 of the Full Bench of Hon'ble High Court of Kerala in the case of Mavilayi Service Co-operative Bank Ltd., vs. Income Tax Officer, Kannur and that the Apex Court has issued notice on the prayer for stay of the order of High Court. B. The Commissioner(Appeals) Thrissur as well as the AO ought to have appreciated that even if the appellant is not a Primary Agricultural credit Co-operative Society the appellant is not a Cooperative Bank and hence eligible for deduction u/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 AO. C. The view of the Commissioner(Appeals) Thrissur as well as the AO that Primary Agricultural Credit Co-operative Societies only are eligible for deduction u/s. 80P is diametrically opposite to the view points expressed by various appellate authorities all over the country in the decisions mentioned below, to name a few: (a) High Court of Karnataka in Bangalore Commercial Transport Credit Society Ltd. - ITA No. 598/2013 dated 27-06-2014. (b) High Court of Guj....
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.... for deduction u/s. 80P made in respect of income from banking and credit business with members may be deleted. 3. The main issue that is raised is whether the CIT(A) is justified in confirming the Assessing Officer's order in denying the claim of deduction u/s. 80P(2)(a)(i) of the I.T. Act. 4. The brief facts of the case are as follow: The assessee is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. For the assessment year 2009-10 return was filed after claiming deduction u/s. 80P of the I.T. Act. The assessment order was passed for assessment year 2009-10 wherein the Assessing Officer disallowed 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)(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. 5. 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....
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....on'ble High Court that the Assessing Officer is not bound by the registration certificate 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 b....
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.... society ceases to be the specified class of societies for which the deduction is provided, even if it was eligible in the initial years." 9.1. The CIT(A) had initially allowed the appeal of the assessee and granted deduction u/s. 80P(2) of the I.T. Act. Subsequently, the CIT(A) passed order 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. Vs. 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 assessee-society. The Full Bench of the Hon'ble Jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. vs. 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 Ass....