JUDGMENT

R.F. Nariman, J.

I.A. Nos. 192273 and 192277 of 2019 are allowed. Leave granted in the Special Leave Petition arising out of Diary No. 31268 of 2019.

2. These appeals have been filed by co-operative societies who have been registered as 'primary agricultural credit societies', together with one 'multi-State co-operative society', and raise important questions as to deductions that can be claimed under section 80P(2)(a) (i) of the Income-Tax Act, 1961 ("IT Act"); and in particular, whether these assessees are entitled to such deductions after the introduction of section 80P(4) of the IT Act by section 19 of the Finance Act, 2006 (21 of 2006) with effect from 01.04.2007. It may be stated at the outset that all these assessees, who are stated to be providing credit facilities to their members for agricultural and allied purposes, have been classified as primary agricultural credit societies by the Registrar of Cooperative Societies under the Kerala Co-operative Societies Act, 1969 ("Kerala Act"), and were claiming a deduction under section 80P(2)(a) (i) of the IT Act, which had been granted to them up to Assessment Year 2007-08.

3. However, with the introduction of section 80P(4) of the IT Act, the scenario changed. In respect of the assessees before us, the assessing officer denied their claims for deduction, relying upon section 80P(4) of the IT Act, holding that as per the Audited Receipt &Disbursal Statement furnished by the assessees in these cases, agricultural credits that were given by the assessee-societies to its members were found to be negligible - the credits given to such members being for purposes other than agricultural credit. The decisions of the assessing officers were challenged up to the Kerala High Court. Before the High Court, the assessees relied upon a decision of a Division Bench of the Kerala High Court in Chirakkal Service Co-operative Bank Ltd. v. CIT (2016) 384 ITR 490 (Ker), where in a batch of appeals challenging assessments completed under section 147 read with 143(3)/144 of the IT Act, the High Court, after considering section 80P(4) of the IT Act, various provisions of the Kerala Act, the Banking Regulation Act, 1949, the bye-laws of the Societies, etc., held that once a Co-operative Society is classified by the Registrar of Co-operative Societies under the Kerala Act as being a primary agricultural credit society, the authorities under the IT Act cannot probe into whether agricultural credits were in fact being given by such societies to its members, thereby going behind the certificate so granted. This being the case, the High Court in Chirakkal (supra) held that since all the assessees were registered as primary agricultural credit societies, they would be entitled to the deductions under section 80P(2)(a)(i) read with section 80P(4) of the IT Act.

4. However, the Department contended that the judgment in Chirakkal (supra) was rendered per incuriam by not having noticed the earlier decision of another Division Bench of the Kerala High Court in Perinthalmanna Service Co-operative Bank Ltd. v. ITO and Anr. (2014) 363 ITR 268 (Ker.), where, in an appeal challenging orders under section 263 of the IT Act, it was held that the revisional authority was justified in saying that an inquiry has to be conducted into the factual situation as to whether a co-operative bank is in fact conducting business as a co-operative bank and not as a primary agricultural credit society, and depending upon whether this was so for the relevant assessment year, the assessing officer would then allow or disallow deductions claimed under section 80P of the IT Act, notwithstanding that mere nomenclature or registration certificates issued under the Kerala Act would show that the assessees are primary agricultural credit societies. These divergent decisions led to a reference order dated 09.07.2018 to a Full Bench