M/s.Perrorkada Service Co-op bank Ltd, Trivandrum V. The ITO, Trivandrum

CO 12/COCH/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4627 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 17-05-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 09-05-2019
• Assessment Year: misc
• Appeal Filed On: 08-03-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: A S BINDHU
• Keywords: Business income; Question of law; Competent authority; Set aside
• Section: 80P

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI CHANDRA POOJAR I, AM & SHRI GEORGE GEORGE K, JM ITA NO. 67 /COCH/201 9 : ASST.YEAR 201 1 - 201 2 THE INCOME TAX OFFICER WARD 2(1) TRIVANDRUM. VS. M/S. PEROORKADA SERVICE CO - OPERATIVE BANK LTD. TC 845/1, PEROORKADA PO TRIVANDRUM - 5 PAN : AAAAP3974B . (APPELLANT) (RESPONDENT) CO NO. 12 /COCH/201 9 : ASST.YEAR 201 1 - 201 2 M/S.PEROORKADA SERVICE CO - OPERATIVE BANK LTD. TC 845/1, PEROORKADA PO TRIVANDRUM - 5 VS. THE INCOME TAX OFFICER WARD 2(1) TRIVANDRUM. ( CROSS OBJECTOR ) (RESPONDENT) REVENUE BY : SMT.A.S.BINDHU, SR.DR ASSESSEE BY : SRI. AMALJITH. DATE OF HEARING : 09.05.2019 DATE OF PRONOUNCEMENT : 17 .05.2019 O R D E R PER GEORGE GEORGE K, JM THIS APPEAL AT THE INSTANCE OF THE REVENUE AND THE CROSS OBJECTION PREFERRED BY THE ASSESSEE ARE DIRECTED AGAINST THE CIT(A)S ORDER DATED 27.11.2018. THE RELEVANT ASSESSMENT YEAR IS 2011 - 2012. 2. TWO ISSUES ARE RAISED IN THESE APPEALS (I) WHETHER THE ASSESSEE IS E NTITLED TO DEDUCTION U/S 80P OF THE I.T.ACT; (II) WHETHER THE INTEREST INCOME RECEIVED BY THE ASSESSEE CAN BE ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 2 TREATED AS `INCOME FROM BUSINESS AND GRANTED DEDUCTION U/S 80P(2) OF THE I.T.ACT. 3. BRIEF FACTS OF THE CASE ARE AS FOLLOWS: THE ASSESSEE IS RE GISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY UNDER THE KERALA STATE CO - OPERATIVE SOCIETIES ACT, 1969. THE ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER BY DENYING THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT. THE ASSESSING OFFICER DENIED THE CLAI M OF DEDUCTION U/S 80P OF THE I.T.ACT FOR THE REASON THAT THE ACTIVITIES OF THE ASSESSEE ARE THAT OF A CO - OPERATIVE BANK AND NOT T HAT OF PRIMARY AGRICULTURAL CREDIT SOCIETY. SECONDLY, THE ASSESSING OFFICER HELD THAT THE INTEREST INCOME RECEIVED BY THE ASSES SEE ON INVESTMENTS SHOULD BE ASSESSED AS `INCOME FROM OTHER SOURCES INSTEAD OF `INCOME FROM BUSINESS CLAIMED BY THE ASSESSEE, THEREBY DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) FOLLOWING THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CHIRAKKAL SERVICE CO - OPERATIVE BANK LTD. (384 ITR 490) HELD THAT THE ASSESSEE BEING REGISTERED AS A PRIMARY AGRICULTURAL CREDIT SOCIETY, WAS ENTITLED TO DEDUCTION U/S 80P(2) OF THE I.T.ACT. AS REGARDS THE INTEREST INCOME RECEIVED BY THE ASSESSEE ON INVESTMENTS, THE CIT(A) HELD THAT THESE ARE INVESTMENTS MADE IN THE COU RSE OF BANKING ACTIVITIES OF THE ASSESSEE AND SHOULD BE ASSESSED AS INCOME FROM BUSINESS, THEREBY GRANTING DEDUCTION U/S 80P(2) OF THE ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 3 I.T.ACT ON SUCH INTEREST INCOME. FOR HOLDING THAT THE INTEREST INCOME SHOULD BE ASSESSED AS INCOME FROM BUSINESS, THE LEA RNED CIT(A) RELIED ON THE ORDER OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR SERVICE CO - OPERATIVE BANK LIMITED IN ITA NO.525/COCH/2014 (ORDER DATED 20.07.2016). 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE DEPARTMENT HAS FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL, RAISING FOLLOWING GROUNDS: - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THIRUVANANTHAPURAM ERRED IN CONCLUDING THAT 'THE APPELLANT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE ACT ON THE BUSINESS INCOME INCLUDING THE INTEREST INCOME EARNED ON THE DEPOSITS WITH THE OTHER BANKS AND THE TREASURY.' 2. IT IS RESPECTFULLY SUBMITTED THAT THE RESPONDENT IS ESSENTIALLY, A CO - OPERATIVE BANK AND NOT MERELY A PRIMARY AGRICULTURAL CREDIT SOCIETY AND HENCE THE ALLOWANCE OF DEDUCTION U/S 80 P 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) WHETHER ON THE FACT S AND IN THE CIRCUMSTANCES OF THE CASE THE ORDER OF CIT(A) DELETING THE ADDITIONS MADE DURING THE COMPLETION OF ASSESSMENT AS PER THE PROVISIONS OF INCOME TAX ACT, CONSIDERING THE PROVISIONS OF SECTION 80P(4) IS CORRECT? (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) IS CORRECT CONSIDERING THE FACT THAT RESERVE / PROVISION IS NEITHER ACTUAL EXPENSES NOR ASCERTAIN LIABILITY AND NOT ENTITLED TO DEDUCTION U/S 80P(2)? ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 4 (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) IS CORRECT IN NOT DULY CONSIDERING THAT THE INTEREST INCOME RECEIVED FROM DEPOSITS MADE WITH BANKS CANNOT BE ATTRIBUTABLE AS PROFIT AND GAINS FROM OUT OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS U/S 80P(2)(A)(I)? (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) IS CORRECT IN NOT DULY CONSIDERING THAT THE ASSESSEE HAS INVESTED SURPLUS FUNDS LIKE AN ORDINARY INVESTOR AND IT HAS TO BE TAXED AS INCOME FROM OTHER SOURCES? (V) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) IS CORRECT IN NOT D ULY CONSIDERING THE JUDGEMENT OF HONBLE SUPREME COURT IN THE CASE OF CITIZE N CO - OPERATIVE SOCIETY LTD VS ACIT, CIRCLE - 9( 1), HYDERABAD DATED 08.08.2017 REPORTED IN 397 I TR I(SC), WHEREIN IT HAS BEEN HELD THAT IF A COOPERATIVE SOCIETY IS VIOLATING THE PRINCIPLE OF MUTUALITY IN THE GRAB OF PERSONS WHO ACT UALLY ARE NOT REAL MEMBERS AND INDULGIN G IN BANKING BUSINESS PER SE THAT IT CANNOT CLAIM THE BENEFIT OF SECTION 80P(2)(A )(I). (VI) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE ORDER OF CIT(A) IS CORRECT IN NOT DULY CONSIDERING FOLLOWING CASE LAWS: (A) 203 ITR 1027 (SC) IN THE CASE OF SABARGANTHA ZILLA KHARID VECHAR SANGH LTD. (B) 363 ITR 68(KERALA) I N THE CASE OF PERUNTHALMANNA SERVICE CORPORATIVE BANK. (C) 234 ITR 201 (KERALA) IN THE CASE OF CIT V S KERALA STATE CO - OPERATIVE MARKETING FEDERATION (D) 322 ITR 283 IN THE CASE OF M/ S TOTGARS CO - OPE RATIVE SALES SOCIETY. FOR THESE AND OTHER GROUNDS THAT MAY BE ADVANCED AT THE TIME OF HEARING THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS), TRIVANDRUM ON THE ABOVE POINTS MAY BE SET ASIDE A ND THAT OF THE ASSESSING OFFICER RESTORED. ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 5 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED ON THE GROUNDS RAISED AND THE LATEST JUDGMENT OF THE LARGER BENCH OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. V. CIT [ITA NO.97/2016 ORDER DATED 1 9 TH MARCH, 2019] . THE LEARNED AR RELIED ON THE ORDERS OF THE CIT(A). THE LEARNED AR HAD FILED A BRIEF WRITTEN SUBMISSION. THE RELEVANT PORTION OF THE SAME READS AS FOLLOW: - 1. THE APPELLANT IS A COOPERATIVE SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT (KCS ACT). THE APPELLANT WAS CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS) AS PER THE KCS ACT BY THE REGISTRAR. DURING THE ASSESSMENT, THE ASSESSING OFF ICER DENIED: A ) DEDUCTION U/S BOP ON BUSINESS INCOME TREATING THE APPELLANT AS A COOPERATIVE BANK AND NOT AS A PRIMARY AGRICULTURAL CREDIT SOCIETY. B ) DEDUCTION U/S BOP ON INTEREST RECEIVED FROM INVESTMENTS FOR THE REASON THAT INTEREST RECEIVED IS TO BE TREAT ED AS INCOME FROM OTHER SOURCES. 2. FOLLOWING THE DECISION OF THE HON'BLE HIGH COURT OF KERALA IN THE CASE OF CHIRAKKAL SERVICE COOPERATIVE BANK [(2016) 239 TAXMANN 417], THE LEARNED CIT(A), KOTTAYAM ALLOWED THE DE DUCTION U/S 80 P. LEARNED CIT(A), KOTTAYA M, TREATED THE INTEREST RECEIVED ON INVESTMENT AS INCOME FROM BUSINESS FOLLOWING THE DECISION OF HON'BLE IT AT, COCHIN BENCH IN THE CASE OF KIZHATHADIYOOR SERVICE COOPERATIVE BANK. [ITA NO. 525/COCH/2014 ORDER DATED 20/07/2016]. 3. THE REVENUE HAS PREFER RED THE APPEAL BEFORE THE HON'BLE ITAT IN LIGHT OF THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF CITIZEN COOPERATIVE CREDIT SOCIETY [397 ITR 1 (SC)] AND SIMILAR OTHER CASES. 4. THERE EXISTED 2 DIVERGENT DECISIONS OF DIVISION BENCHES OF HON'BLE HIGH COURT OF KERALA IN THE CASE OF PERINTHALMANNA SERVICE COOPERATIVE BANK AND CHIRAKKAL SERVICE COOPERATIVE BANK. IN PERINTHALMANNA SERVICE COOPERATIVE BANK CASE, THE DIVISION BENCH HELD THAT THE ASSESSING OFFICER SHALL NOT GRANT THE DEDUCTION BY MERELY LOOK ING AT THE REGISTRATION CERTIFICATE UNDER THE KCS ACT ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 6 AND THE NOMENCLATURE GIVEN BY THE DEPARTMENT OF COOPERATION. HOWEVER, THE DECISION IN THE CASE OF CHIRAKKAL SERVICE COOPERATIVE BANK WAS THAT THE ASSESSING OFFICER SHALL NOT PROBE INTO THE FACTS BUT CA N RELY ON THE REGISTRATION CERTIFICATE. CONSIDERING THE DIVERGENT OPINIONS, THE MATTER WAS PLACED BEFORE LARGER BENCH IN THE CASE OF MAVILAYI SERVICE COOPERATIVE BANK [ITA 97/2016]AND OTHERS. THE L ARGER BENCH OF HON'BLE HIGH COURT HAS ADJUDICATED THE MATTER PLACED BEFORE THEM VIDE ORDER DATED 19/03/2019. 5. HON'BLE LARGER BENCH HELD THAT: 5.1. THE ASSESSING OFFICER HAS TO CONDUCT AN ENQUIRY INTO THE FACTUAL SITUATION AS TO THE ACTIVITIES OF THE A SSESSEE SOCIETY TO DETERMINE THE ELIGIBILITY OF DEDUCTION U/S 80P OR DENIAL OF BENEFIT U/S 80P(4). THE ASSESSING OFFICER SHALL NOT MERELY RELY ON THE REGISTRATION CERTIFICATE. 5.2. SINCE EACH ASSESSMENT YEAR IS SEPARATE, THE ELIGIBILITY SHALL BE VERIFIED EACH YEAR. 6. PARA 6 OF THE ORDER OF THE LARGER BENCH DISCUSSES THE ISSUES THE HON'BLE BENCH PROPOSE TO CONSIDER. THE LARGER BENCH DEEM IT APPROPRIATE TO CONSIDER ONLY THE QUESTION REFERRED TO THE FULL BENCH AND DID NOT CONSIDER THE VARIOUS CONTENTIONS R AISED ON MERITS. THE HON'BLE LARGER BENCH OF HIGH COURT OF KERALA DID NOT EXPRESSED OPINION ABOUT THE ELIGIBILITY FOR DEDUCTION U/S 80P RATHER DECIDED ABOUT THE POWER OF THE ASSESSING OFFICER TO VERIFY THE FACTS IN EACH YEAR. 7. IN PARA 12, 13 AND 14, THE HON'BLE BENCH DISCUSSES ABOUT THE PROVISIONS OF KCS ACT AND OBSERVE THAT W.E.F 28/04/2010, ONCE THE PRINCIPAL OBJECT IS NOT FULFILLED BY A PACS, SUCH SOCIETY SHALL LOOSE THE CHARACTERISTICS OF A PACS. THE BENCH FINALLY OBSERVED THAT SUCH SOCIETIES LOOSE THE IDENTITY OF A PACS IRRESPECTIVE OF WHETHER THE REGISTRAR HAS MADE CHANGES OR NOT. THUS, THE LARGER BENCH CONCLUDED THAT THE FACTS NEED TO BE VERIFIED EACH YEAR. 8. IN PARA 21, THE LARGER BENCH EXPRESSES THE OBSERVATIONS ABOUT THE DECISION OF HON'BLE APEX COURT IN THE CASE OF CITIZEN COOPERATIVE CREDIT SOCIETY. HON'BLE LARGER BENCH OBSERVED THAT THE HON'BLE APEX COURT DENIED DEDUCTION U/S 80P IN THE CASE OF CITIZEN CREDIT COOPERATIVE SOCIETY NOT U/S 80P(4) BUT BECAUSE IT VIOLA TED THE PROVISIONS OF THE MULTI STATE COOPERATIVE SOCIETIES ACT UNDER WHICH IT WAS REGISTERED. ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 7 9. IN THE PRESENT CASE, THE APPELLANT DO NOT CLAIM TO BE A PACS. THUS THE FACTUAL VERIFICATION OF PROVIDING AGRICULTURAL LOANS IS IRRELEVANT. THE ASSESSING OF FICER HAS ANALYSED THE DEFINITION OF 'COOPERATIVE BANK' IN THE ASSESSMENT ORDER BUT ERRONEOUSLY CONCLUDED THAT THE APPELLANT IS A COOPERATIVE BANK. 10. THE APPELLANT IS A COOPERATIVE SOCIETY REGISTERED UNDER THE KERALA COOPERATIVE SOCIETIES ACT. AS PER S ECTION 2(1) OF KCS ACT, A MEMBER INCLUDES A NOMINAL OR ASSOCIATE MEMBER. HENCE, FOR THE COOPERATIVE SOCIETIES REGISTERED UNDER KCS ACT, TRANSACTIONS WITH NOMINAL MEMBERS IS NOT IN VIOLATION OF THE KCS ACT. L1. AS PER SECTION 80P(2)(A)(I), A COOPERATIVE S OCIETY ENGAGED IN THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION OF THE WHOLE OF THE PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO SUCH ACTIVITIES. AS PER SECTION 80P( 4), THE DEDUCTION U/S 80P IS NOT BE AV AILABLE TO COOPERATIVE BANKS. PRIMARY AGRICULTURAL CREDIT SOCIETY (PACS) AND PRIMARY COOPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK (PCARDB) ARE EXCLUDED FROM THE DENIAL OF DEDUCTION U/S 80P( 4). THUS THE CONCLUSION IS: PACS, PCARD BANKS ARE ELIGIB LE FOR DEDUCTION U/S 80P COOPERATIVE SOCIETIES OTHER THAN COOPERATIVE BANKS ARE ELIGIBLE FOR DEDUCTION U/S 80P. 12. COOPERATIVE SOCIETY IS DEFINED IN SECTION 2(19): 'COOPERATIVE SOCIETY' MEANS A COOPERATIVE SOCIETY REGISTERED UNDER THE COOPERATIVE SOC IETIES ACT, 1912 OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF COOPERATIVE SOCIETIES. 13. AS PER EXPLANATION (A) TO SECTION 80P( 4), 'COOPERATIVE BANK' SHALL HAVE THE MEANING ASSIGNED TO IT IN PART V OF THE BANKING REGULATION ACT, 1949 (BR ACT). AS PER SECTION 5 (CEI) OF BR ACT: 'CO - OPERATIVE BANK' MEANS A STATE CO - OPERATIVE BANK.A CENTRAL CO - OPERATIVE BANK AND A PRIMARY CO - OPERATIVE BANK. AS PER SECTION 5 (CCVII) OF BR ACT: 'CENTRAL CO - OPERATIVE BANK', 'PRIMARY RURAL CREDIT SOCIETY' AND 'STATE CO - OPERATIVE BANK' SHALL HAVE THE MEANINGS ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 8 RESPECTIVELY ASSIGNED TO THEM IN THE NATIONAL BANK FOR A GRICULTURE AND RURAL DEVELOPMENT ACT, 1981.(NABAKD ACT). 13.1. AS PER NABARD ACT, SECTION 2 (U): STATE CO - OPERATIVE BANK MEANS THE PRINCIPAL CO - OPERATIVE SOCIETY IN A STATE, THE PRIMARY OBJECT OF WHICH IS THE FINANCING OF OTHER CO - OPERATIVE SOCIETIES IN T HE STATE. 13.2. AS PER NABARD ACT, SECTION 2 (U): CENTRAL CO - OPERATIVE BANK MEANS THE PRINCIPAL CO - OPERATIVE SOCIETY IN A DISTRICT IN A STATE, THE PRIMARY OBJECT OF WHICH IS THE FINANCING OF OTHER CO - OPERATIVE SOCIETIES IN THAT DISTRICT. 13.3. THE THIRD ENTITY INCLUDED IN THE DEFINITION OF 'COOPERATIVE BANK' IS 'PRIMARY COOPERATIVE BANK'. AS PER SECTION 5 (CCV) OF BR ACT: 'PRIMARY CO - OPERATIVE BANK' MEANS A CO - OPERATIVE SOCIETY, OTHER THAN A PRIMARY AGRICULTURAL CREDIT SOCIETY, - (L)THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS; (2) THE PAID - UP SHARE CAPITAL AND RESERVES OF WHICH ARE NOT LESS THAN ONE LAKH OF RUPEES; AND (3)THE BYE - LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO - OP ERATIVE SOCIETY AS A MEMBER. PROVIDED THAT THIS SUB - CLAUSE SHALL NOT APPLY TO THE ADMISSION OF A CO - OPERATIVE BANK AS A MEMBER BY REASON OF SUCH CO - OPERATIVE BANK SUBSCRIBING TO THE SHARE CAPITAL OF SUCH CO - OPERATIVE SOCIETY OUT OF FUNDS PROVIDED BY THE STATE GOVERNMENT FOR THE PURPOSE. 14. THE APPELLANT IS REGISTERED AS A COOPERATIVE SOCIETY UNDER THE KERALA COOPERATIVE SOCIETIES ACT. HENCE THE APPELLANT FALLS WITHIN THE DEFINITION OF 'COOPERATIVE SOCIETY'. 14.1. IT IS AN UNDENIABLE FACT THAT THE APPEL LANT IS A COOPERATIVE SOCIETY. 14.2. TO CLASSIFY THE APPELLANT AS A 'COOPERATIVE BANK', THE APPELLANT SHALL FALL WITHIN THE DEFINITION OF COOPERATIVE BANK. IT IS UNDISPUTABLE THAT THE APPELLANT IS NOT A STATE COOPERATIVE BANK OR A CENTRAL COOPERATIVE BANK . THE APPELLANT IS NOT A 'PRIMARY COOPERATIVE BANK' FOR THE REASON THAT IT DOES NOT SATISFY THE 1ST AND 3RD CONDITIONS SPECIFIED ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 9 IN THE, DEFINITION OF 'PRIMARY COOPERATIVE BANK'. 14.2.1. THE FIRST CONDITION IS 'THE PRIMARY OBJECT OR PRINCIPAL BUSINESS OF WHICH IS THE TRANSACTION OF BANKING BUSINESS'. THE APPELLANT'S PRIMARY OBJECT OR PRINCIPAL BUSINESS IS NOT CONDUCTING BANKING BUSINESS. THE APPELLANT DOES NOT POSSESS THE LICENSE OF RESERVE BANK OF INDIA T O DO BANKING ACTIVITIES. HENCE THE FIRST CONDITION IS NOT FULFILLED. 14.2.2. THE THIRD CONDITION IS 'THE BYE - LAWS OF WHICH DO NOT PERMIT ADMISSION OF ANY OTHER CO - OPERATIVE SOCIETY AS A MEMBER'. THE APPELLANT'S BYE LAWS PERMIT THE ADMISSION OF OTHER COOPERATIVE SOCIETIES AS MEMBERS. HENCE, THE THIRD CONDI TION IS NOT FULFILLED. 15. CIRCULAR NO. 133 OF 2007 BY CBDT DATED 09/05/2007 CLARIFIES THAT ALL COOPERATIVE SOCIETIES OTHER THAN COOPERATIVE BANKS ARE ELIGIBLE FOR DEDUCTION U/S 80P. THE APPELLANT ALSO PLACE RELIANCE ON THE FOLLOWING JUDGMENTS: 15.1. HON'BLE HIGH C OURT OF GUJARAT IN THE CASE OF J AFARI MOMIN VIKAS CREDIT COOPERATIVE SOCIETY [TAX APPEAL NO. 442,443 & 863 OF 2013, ORDER DATED 15/01/2014] A COOPERATIVE SOCIETY WHICH IS NOT A COOPERATIVE BANK IS ELIGIBLE FOR DEDUCTION U/S 80P. 15.2. HON 'BLE KARNATAKA HIGH COURT IN THE CASE OF SRI BILURU GURUBASAVA PATTINA SAHAKARI SANGHA NIYAMITHA BAGALKOT [ITA NO. 5006/2013, ORDER DATED 05/02/2014]. COOPERATIVE SOCIETIES WHICH DO NOT POSSESS THE LICENSE FROM RESERVE BANK OF INDIA ARE NOT COOPERATIVE BA NKS. A COOPERATIVE CARRYING ON THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS IS ELIGIBLE FOR DEDUCTION U/S 80P. 15.3. HON'BLE HIGH COURT OF BOMBAY AT GOA IN THE CASE OF THE QUEPEM URBAN COOPERATIVE CREDIT SOCIETY LTD [TAX APPEALS NO. 22,23 & 24 OF 2015, ORDER DATED 17/04/2015]. IF ALL THE THREE CONDITIONS MENTIONED IN THE DEFINITION OF 'PRIMARY COOPERATIVE BANK' IS NOT SATISFIED CUMULATIVELY' A COOPERATIVE SOCIETY CANNOT BE TREATED AS A PRIMARY COOPERATIVE BANK AND IN TURN A COOPERATIVE BANK. ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 10 16. THE INTEREST INCOME RECEIVED F ROM DEPOSITS WITH COOPERATIVE BANKS AND OTHERS IS TO BE TREATED AS INCOME FROM BUSINESS. THIS VIEW WAS UPHELD BY HON'BLE IT AT, COCHIN BENCH IN THE CASE OF M/S. POSTAL TELECOM BSNL EMPLOYEES COOPERATIVE SOCIETY LTD.IN ITA 68 TO 72/COCH/2019, ORDER DATED 30/04/2019. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSING OFFICER DENIED DEDUCTION U/S 80P OF THE I.T.ACT TO THE ASSESSEE BY TREATING THAT ITS ACTIVITIES ARE THAT OF A CO - OPERATIVE BANK AND NOT A CO - OPERATIVE SOCIETY. THE ASSESSEE IS ADMITTEDLY REGISTERED AS A PRIMARY AGRICULTURAL SOCIETY UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969 BY THE REGISTRAR OF SOCIETIES. THE FULL BENCH OF THE HON BLE HIGH COURT IN THE CASE OF THE MAVILAYI SERVICE CO - OPERATIVE BANK LTD. (SUPRA) HELD THAT THE ASSESSING OFFICER 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. IT WAS HELD BY THE HONBLE 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 HONBLE HIGH COURT HELD THAT EACH ASSESSMENT YEAR IS SEPARATE AND ELIGIBI LITY SHALL BE VERIFIED BY THE ASSESSING OFFICER FOR EACH OF THE ASSESSMENT YEARS. THE FINDING OF THE LARGER BENCH OF THE HONBLE 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 - SEC TION (4) THEREOF, THE ASSESSING OFFICER ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 11 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 S UCH 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 LIG HT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P. 33. IN CHIRAKKAL [384 ITR 490] THE DIVISION BENCH HELD THAT THE APPELLANT SOCIETIES HAVING BEEN CLASSIFIED AS PRIMARY AGRICULTURAL CREDIT SOCIETIES BY THE COMPETENT AUTHORITY UNDER THE KCS ACT, I T 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 FIX ED 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 THEMS ELVES 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 CLASSIFIE D 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 PERINTHALMAN NA [363 ITR 268]. MOREOVER, THE LAW LAID DOWN BY THE DIVISION BENCH IN CHIRAKKAL [384 ITR 490] IS NOT GOOD LAW, SINCE, IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1], ON A CLAIM FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT, BY REASON OF SUB - SECTION (4) THEREOF, 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 LIG HT OF THE PROVISIONS UNDER SUB - SECTION (4) OF SECTION 80P OF THE IT ACT. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN CITIZEN CO - OPERATIVE SOCIETY [397 ITR 1] THE LAW LAID DOWN BY THE DIVISION BENCH PERINTHALMANNA [363 ITR 268] HAS TO BE AFFIRMED AND WE DO SO. 35. IN VIEW OF THE LAW LAID DOWN BY THE APEX COURT IN ACE MULTI AXES SYSTEMS CASE (SUPRA), SINCE EACH ASSESSMENT YEAR IS A SEPARATE UNIT, THE INTENTION OF THE LEGISLATURE IS IN NO ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 12 MANNER DEFEATED BY NOT ALLOWING DEDUCTION UNDER SECTION 80P OF THE IT ACT, BY REASON OF SUB - SECTION (4) THEREOF, IF THE ASSESSEE SOCIETY CEASES TO BE THE SPECIFIED CLASS OF SOCIETIES FOR WHICH THE DEDUCTION IS PROVIDED, EVEN IF IT WAS ELIGIBLE IN THE INITIAL YEARS. 7.1 IN VIEW OF THE DICTUM LAID DOWN BY THE FULL BEN CH OF THE HONBLE HIGH COURT, THE ISSUE OF DEDUCTION U/S 80P(2)(A)(I) IS RESTORED TO THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL EXAMINE THE ACTIVITIES OF THE ASSESSEE AND DETERMINE WHETHER ITS ACTIVITIES ARE IN COMPLIANCE WITH THE ACTIVI TIES OF A CO - OPERATIVE SOCIETY FUNCTIONING UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969 AND GRANT DEDUCTION U/S 80P(2) IN ACCORDANCE WITH LAW. 8. AS REGARDS THE INTEREST ON THE INVESTMENTS WITH CO - OPERATIVE BANKS AND OTHER BANKS, THE CO - ORDINATE BEN CH ORDER OF THE TRIBUNAL IN THE CASE OF KIZHATHADIYOOR SERVICE CO - OPERATIVE BANK LIMITED (SUPRA) HELD THAT INTEREST INCOME EARNED FROM INVESTMENTS WITH TREASURIES AND BANKS IS PART OF BANKING ACTIVITY OF THE ASSESSEE, AND THEREFORE, THE SAID INTEREST INCOM E 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(2) ON SUCH INTEREST INCOME, THE ASSESSING OFFICER SHALL EXAMINE THE ASSESSEES ACTIVITIES WHETHER IT IS IN TU NE WITH THE ACTIVITIES EXPECTED OF A CO - OPERATIVE SOCIETY REGISTERED UNDER THE KERALA CO - OPERATIVE SOCIETIES ACT, 1969 AND GRANT DEDUCTION ON SUCH INTEREST INCOME U/S 80P(2) OF THE I.T.ACT. IT IS ORDERED ACCORDINGLY. ITA NO. 67 & CO 12 / COCH /201 9. M/S. PEROORKADA SCB LTD. 13 9. THE GROUND S RAISED IN THE CROSS OB JECTION IS ONLY SUPPORTING THE ORDER OF THE CIT(A). SINCE WE HAVE ALREADY DI SPOSED OFF THE REVENUES APPEAL , THE CROSS OBJECTION FILED BY THE ASSESSEE IS RENDERED INFRUCTUOUS AND THE SAME IS DISMISSED AS SUCH. 10. IN THE RESULT, THE APPEAL FILED BY THE R EVENUE IS ALLOWED FOR STATISTICAL P URPOSES AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 17 TH DAY OF MAY, 2019 . SD/ - SD/ - ( CHANDRA POOJARI ) ( GEORGE GEORGE K. ) ACCOUNTANT MEMBER JUDICIA L MEMBER COCHIN ; DATED : 17 TH MAY, 2019 . DEVDAS* COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT. REGISTRAR) ITAT, COCHIN 1. THE APPELLANT S 2. THE RESPONDENT. 3. THE CIT (APPEALS) THIRUVANANTHAPURAM. 4. THE PR.CIT THIRUVANANTHAPURAM. 5. DR, ITAT, COCHIN 6 . GUARD FILE.