KUNNAMANGALAM CO-OPERATIVE BANK vs. THE INCOME TAX OFFICER

J U D G M E N T S.V.BHATTI,J. Heard learned counsel Mr.Anil D Nair and learned Senior Counsel Sri. P.K.R Menon for parties.

The Income Tax Officer, Ward 2(3), Kozhikode/Revenue is the respondent. The assessee being aggrieved by the order dated 25.07.2014 in I.T.A No.156 /Coch/2014 has filed the present appeal under Section 260A of the Income Tax Act, 1961 (for short, the Act). The subject matter of the appeal relates to the issues coming for consideration in the return filed by the assessment Year 2009-10. The appellant claims to be a registered Primary Agricultural Credit Society and is a Bank in the Co-operative Sector. The assessee claimed deduction under Section 80P (2) ( a) (i) of the Act. The deduction claimed by the assessee was disallowed and thus resulting in the filing of the appeal before the Commissioner of Income Tax (Appeals) and the ITA NO. 264 OF 2014 -3- resultant order in Annexure- B and further appeal before the Tribunal and the resultant order 25.07.2014 in Annexure-C. The assessee raises the following substantial question of law: i) In the facts and circumstances of the case, ought not the Tribunal have allowed the deduction under section 80P (2)(a) (i) to the appellant being income from providing credit facilities to its members ? ii) In the facts and circumstances of the case, ought not the Tribunal have held that the Assessing Officer cannot deny the benefit of the certificate of registration given by the Competent authority/the Co-operative department without referring the issue to the Reserve Bank of India as per Explanation to section 5 (ccvi)? iii) Ought not the Tribunal conclude that the appellant is a Primary Agricultural Co-operative Society as confirmed by the statutory authority and allowed the claim of exemption under section 80 P (2) (a)(i)?

ITA NO. 264 OF 2014 -4- and others v. commissioner of Income tax and another1 has declared the law on the entitlement of deduction in favour of a Co- operative Society registered under the Co-operative Societies Act. In the case on hand the Tribunal has considered a few circumstances and has also found that the assessee is doing business in banking. According to him, the said finding is unsustainable both in law and fact. It is argued that the assessee is catering to the needs of its members and is not independently doing banking business to dis-entitle itself for deduction under Section 80P. According to him, the judgments of the Supreme Court in the Mavilayi case are applicable to the case on hand in all fours. Firstly, he prays for setting aside the judgment under appeal and holding that the assessee is entitled to the benefits under Section 80P of the Act. It is alternatively argued that as a few circumstances are considered by the Tribunal to ensure that the return filed by the assessee is finalised in accordance with law, the matter could be remitted to Tribunal for consideration and 1 [2021] 431 ITR 1 (SC)

ITA NO. 264 OF 2014 -5- disposal afresh in accordance with law.

ITA NO. 264 OF 2014 -6- the judgment of the Supreme Court in Mavilayi case, parties are given liberty to place such material as may be advised in this behalf in support of their respective contentions. The questions are answered in favour of assessee and against the revenue and matter remitted to Tribunal for disposal.

The Appeal is allowed as indicated above. No order as to costs. S.V.BHATTI JUDGE VIJU ABRAHAM JUDGE JS

ITA NO. 264 OF 2014 -7-