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06-01-2020, The Punukkannoor Service, Section 80P(4), Tribunal Cochin
These appeals at the instance of the assessee are directed against various orders of the CIT(A), all dated 03.09.2019. The assessee has also preferred stay applications seeking to stay the recovery of outstanding tax arrears. The relevant assessment years are 2010-2011 to 2015-2016.
2. 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 2010-2011 to 2015-2016, the returns of income were filed on 28.11.2017 declaring income of Rs.Nil, after 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 ection 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 Distric 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 High Court in the case of Chirakkal Service Cooperative Co-operative Bank Ltd. v. CIT [(2016) 384 ITR 490 (Ker.).
4. Subsequently, the CIT(A) issued notice u/s 154 of the I.T.Act proposing to rectify his orders passed, in view of the subsequent judgment of the Full Bench of the Hon’ble jurisdictional High Court in the case of The Mavilayi Service Co-operative Bank Ltd. v. CIT [ITA No.97/2016 order dated 19th March, 2019]. The assessee objected to the issuance of notices. However, the CIT(A) rejected the objections raised by the assessee and passed orders u/s 154 of the I.T.Act,
disallowing the claim of the assessee u/s 80P(2) of the I.T.Act.
5. Aggrieved by th orders of the CIT(A), the assessee has filed these appeals before the Tribunal raising the following identical grounds:-
“1. T e rectification order of the Honourable CIT (Appeals) is erroneous on the facts and in the law. That the appellant denies his liability to be assessed at a total income of Rs. 16 62,100/- .against returned income of Rs NIL and accordingly denies his liability to pay tax and interest demanded there on. The CIT(A) has not considered the written submission by the appellant's AR on 22.08.2019 in response to the letter from his office issued on 07.08.2019.
2. The CIT (A) has not considered the below points raised by the appellant before passing the rectification order disallowing appellant claim u/s 80P.
(a) The appellant is a Primary Agricultural Credit Society engaged in banking business providing credit facility to its members, registered under the Kerala Co-Operative Societies Act, working with in the rural areas of Punukkannoor Village, Elampalloor Panchayath, Perumpuzha, Kollam since 1947. The members of the society are mainly rural agriculturist. The main activity of the society is to provide credit facility to its members for agriculture purpose and for purpose connected with agricultural activities and rural development.
(b) The working area of the society is confined only to the rural limits of Punukkannoor village.
(c) The members of the society are rural agriculturist.
(d) The society deals only with its members by accepting deposits and providing credit facilities between members.
(e) Category of Advances:
The following types of advances were given by the society
a. KCC (Kisan Credit Card)
b. MTL (Medium Term Loan)
c. CSOL (Co-Operative Society 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 t the farmers who were members of the society for Agricultural and Rural development purpose. The society assists its members for meeting their requirements of Agricultu e 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 percentage of the total loans sanctioned is not true to facts. Though majority of the advances are agricultural in nature, the circumstances under which the appellant society and other societies are