M/s. Uppinangady Co-operative Agricultural Society Limited, Puttur V. Income Tax Officer, Ward - 1, Puttur

ITA 1207/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 4388 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 20-02-2020
• Assessment Year: 2016-2017
• Appeal Filed On: 28-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJEET SINGH
• Assessee Lawyers: V. SRINIVASAN
• Keywords: Co-operative Credit Society; Set aside
• Section: 234B; 80P; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES A, BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.1207/BANG/2019 : ASST.YEAR 2016-2017 M/S. UPPINANGADY CO-OPERATIVE AGRICULTURAL SOCIETY LIMITED PUTTUR TALUK PUTTUR 574 241. PAN : AAAAU7375D. VS. THE INCOME TAX OFFICER WARD 1 PUTTUR. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.V.SRINIVASAN, ADVOCATE RESPONDENT BY : SRI.MANJEET SINGH, ADDL.CIT-DR DATE OF HEARING : 20.02.2020 DATE OF PRONOUNCEMENT : 27.02.2020 O R D E R PER CHANDRA POOJARI, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE CIT(A), DATED 26.03.2019. THE RELEVANT ASSESSMENT YEAR IS 2016-2017. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE ORDERS OF THE AUTHORITIES BELOW IN SO FAR AS THEY ARE AGAINST THE APPELLANT, ARE OPPOSED TO LAW, EQUITY, WEIGHT OF EVIDENCE, PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSED OVER AND ABOVE THE INCOME RETURNED INCOME OF RS.8,23,810/- AFTER CLAIMING DEDUCTION OF RS.1,06,78,048/- UNDER SECTION 80P[2][A][I] & 80P [2][D] OF THE ACT, IN RESPECT OF THE INCOME DERIVED FROM BUSINESS OF PROVIDING. CREDIT FACILITIES TO ITS MEMBERS AND GODOWN RENT EARNED BY THE APPELLANT UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 2 3. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE APPELLANT IS A PRIMARY AGRICULTURAL CREDIT CO-OP. SOCIETY AND HENCE THE PROVISIONS OF SEC. 80P[4] WAS NOT APPLICABLE UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 4. THE LEARNED CIT[A] ERRED IN HOLDING THAT THE BUSINESS OF PROVIDING CREDIT FACILITIES TO THE MEMBERS CARRIED ON BY THE APPELLANT CANNOT BE REGARDED AS A BUSINESS CARRIED ON BY A CO-OPERATIVE SOCIETY COMPLYING WITH THE PRINCIPLES OF MUTUALITY SINCE THE APPELLANT HAD ADMITTED NOMINAL MEMBERS, WHO COULD NEITHER VOTE NOR WERE ENTITLED TO A SHARE IN THE PROFITS AS PER THE BYE-LAWS OF THE APPELLANT AND HENCE, THE APPELLANT WAS NOT ENTITLED TO DEDUCTION U/S. 80P[2][A][I] OF THE ACT HAVING REGARD TO THE RATIONALE BEHIND THE JUDGEMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF CITIZENS CO-OPERATIVE SOCIETY REPORTED IN 397 ITR 1 [SC] UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 5. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE APPELLANT CO-OPERATIVE SOCIETY HAD NO DOUBT ADMITTED NOMINAL MEMBERS, WHICH WAS PERMISSIBLE UNDER THE KARNATAKA CO-OPERATIVES SOCIETIES ACT, 1959 AND THAT THERE WAS NO VIOLATION OF ANY OF THE PROVISIONS OF THE KARNATAKA CO-OPERATIVE SOCIETIES ACT UNDER WHICH THE APPELLANT WAS CONSTITUTED AND THEREFORE, THE JUDGEMENT OF THE HON'BLE SUPREME COURT RELIED UPON IN THE CASE OF CITIZENS CO-OPERATIVE SOCIETY REPORTED IN 397 ITR 1 WAS DISTINGUISHABLE AND WHOLLY INAPPLICABLE TO THE FACTS OF THE APPELLANT'S CASE. 6. WITHOUT PREJUDICE TO THE. ABOVE, THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THE ALTERNATE CLAIM MADE BY THE APPELLANT FOR ALLOWANCE OF DEDUCTION U/S. 80P OF THE ACT WITH REFERENCE TO THE EXTENT OF INCOME DERIVED FROM ADVANCES GIVEN TO MEMBERS APART FROM NOMINAL MEMBERS, WHICH WAS EXEMPT UNDER THE PRINCIPLES OF ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 3 MUTUALITY AS HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF MIS. QUEPEM URBAN CO-OPERATIVE CREDIT SOCIETY LTD IN ITA NO. 22 TO 24 OF 2015 DATED 17/04/2015 UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 7. WITHOUT PREJUDICE TO THE ABOVE, THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN HOLDING THAT THE INTEREST OF RS.1,37,44,585/- RECEIVED BY THE APPELLANT FROM DEPOSITS/INVESTMENTS IN SOUTH CARRARA DISTRICT CO-OP. BANK WAS LIABLE FOR ASSESSMENT UNDER THE HEAD 'OTHER SOURCES' UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 8. THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAD EARNED THE INTEREST INCOME OF RS.1,37,44,585/- FROM INVESTMENTS STATUTORILY REQUIRED TO BE MAINTAINED UNDER THE KARNATAKA CO- OPERATIVE SOCIETIES ACT FROM OUT OF THE PROFITS BESIDES 25% OF THE TOTAL DEPOSITS AS SLR WITH CO-OPERATIVE BANKS AND 3% OF THE TOTAL DEPOSITS TOWARDS CRR AND THUS, THE INCOME EARNED THEREFROM OUGHT TO HAVE BEEN ASSESSED AS PART OF THE BUSINESS OF THE PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND NOT UNDER THE HEAD 'OTHER SOURCES' UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 9. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT[A] OUGHT TO HAVE APPRECIATED THAT THE COST OF FUNDS OUGHT TO HAVE BEEN ALLOWED U/S. 57[III] OF THE ACT WHILE ASSESSING THE INTEREST INCOME UNDER THE HEAD 'OTHER SOURCES' UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE. 10. WITHOUT PREJUDICE TO THE ABOVE AND WITHOUT PREJUDICE TO THE RIGHT OF THE APPELLANT TO SEEK FOR WAIVER OF THE INTEREST LEVIED, THE APPELLANT DENIES ITSELF LIABLE TO BE CHARGED TO INTEREST UNDER SECTION 234B AND 234C OF THE INCOME TAX ACT, WHICH LEVY, UNDER THE FACTS AND IN THE CIRCUMSTANCES OF THE APPELLANT'S CASE, DESERVES TO BE CANCELLED. ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 4 11. FOR THE ABOVE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, YOUR APPELLANT HUMBLY PRAYS THAT THE APPEAL MAY BE ALLOWED AND JUSTICE RENDERED AND THE APPELLANT MAY BE AWARDED COSTS IN PROSECUTING THE APPEAL AND ALSO ORDER FOR THE REFUND OF THE INSTITUTION FEES AS PART OF THE COSTS. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN AGRICULTURAL CO-OPERATIVE SOCIETY, REGISTERED UNDER THE KARNATAKA CO-OPERATIVE SOCIETIES ACT, 1959. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2016-2017 DECLARING TOTAL INCOME OF RS.8,23,810 AFTER CLAIMING DEDUCTION U/S 80P OF THE ACT AT RS.1,06,78,048. THE RETURN OF INCOME WAS SELECTED FOR SCRUTINY THROUGH CASS. THE ASSESSING OFFICER NOTICED THAT THE PRINCIPLES OF MUTUALITY WERE VIOLATED BY THE ASSESSEE-SOCIETY AND THEREFORE DENIED THE DEDUCTION IN VIEW OF THE HONBLE SUPREME COURT JUDGMENT IN THE CASE OF M/S.CITIZEN CO-OPERATIVE SOCIETY LTD. REPORTED IN 397 ITR 1 (SC). THE ASSESSING OFFICER DISALLOWED THE ENTIRE DEDUCTION CLAIMED BY THE ASSESSEE, ON THE FOLLOWING GROUNDS :- (A) INTEREST / DIVIDEND EARNED OF RS.1,37,44,585 FROM INVESTMENT WITH CO-OPERATIVE / SCHEDULED BANKS INCOME WAS HELD TO BE INCOME FROM OTHER SOURCES AND EXCLUDED FROM THE DEDUCTION U/S 80P(2)(A)(I). FURTHER DEDUCTION U/S 80P(2)(D) WAS ALSO DENIED RELYING ON THE HONBLE KARNATAKA HIGH COURT DECISION IN THE CASE OF M/S.TOTGARS CO-OPERATIVE SALE SOCIETY LTD. DATED 16 TH JUNE, 2017. (B) THE PRINCIPLE OF MUTUALITY WERE VIOLATED RELYING UPON THE DECISION OF HONBLE APEX COURT IN THE CASE OF M/S.CITIZEN CO-OPERATIVE SOCIETY LTD., HYDERABAD DATED 8 TH SEPTEMBER, 2017. ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 5 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER DENYING THE DEDUCTION U/S 80P(2)(A)(I) / 80P(2)(D) OF THE ACT, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. AGAINST THE ABOVE ORDERS OF THE AUTHORITIES BELOW, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT SIMILAR ISSUE CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN THE CASE OF M/S.SINDHU CREDIT SOUHARDA SAHAKARI NIYAMITA V. ITO IN ITA NO.2144/ BANG/2019 ORDER DATED 04 TH DECEMBER, 2019, WHEREIN IT WAS HELD AS UNDER:- 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. REGARDING THE JUDGMENT OF HON'BLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF PR. CIT VS. VIJAY SOUHARDA CREDIT SAHAKARI LTD. (SUPRA) ON WHICH RELIANCE WAS PLACED BY LD. DR OF REVENUE AS PER WHICH THE MATTER WAS RESTORED BACK TO AO TO EXAMINE THE APPLICABILITY OF THE JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA), I FIND THAT IN THE PRESENT CASE, THIS IS NOT THE CASE OF THE AO AS PER THE ASSESSMENT ORDER THAT THIS JUDGMENT OF HONBLE APEX COURT RENDERED IN THE CASE OF THE CITIZEN CO-OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) IS APPLICABLE IN THE PRESENT CASE. AS PER THE IMPUGNED ORDER OF LD. CIT(A) ALSO, NO FINDING OF LD. CIT(A) IS THERE THAT THIS JUDGMENT RENDERED IN THE CASE OF THE CITIZEN CO- OPERATIVE SOCIETY LTD. VS. ACIT (SUPRA) IS APPLICABLE IN THE PRESENT CASE. HENCE, I HOLD THAT THIS JUDGMENT OF HON'BLE KARNATAKA HIGH COURT HAS NO APPLICABILITY IN THE PRESENT CASE IN VIEW OF THE FACTS DISCUSSED ABOVE. REGARDING THE ARGUMENT OF LD. DR OF REVENUE THAT THE EARLIER TRIBUNAL ORDER RENDERED BY THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE OF M/S. UDAYA SOUHARDA CREDIT COOPERATIVE SOCIETY LTD. (SUPRA) SHOULD BE FOLLOWED IN PREFERENCE TO THE LATER DECISION OF SMC BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF SIDDARTHA PATTINA SOUHARDA ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 6 SAHAKARI NIYAMITHA VS. ITO (SUPRA), I FIND THAT IN THIS LATER CASE, THE SMC BENCH OF THE TRIBUNAL HAS DULY CONSIDERED THE EARLIER DECISION OF THE DIVISION BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF M/S. UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY (SUPRA) AND IT IS ALSO NOTED THAT LD. CIT(A) AND AO IN THAT CASE HAS EXAMINED THE WHOLE ISSUE IN THE LIGHT OF KARNATAKA SOUHARDA SAHAKARI ACT, 1997. BECAUSE OF THIS REASON, IT WAS HELD BY THE SMC BENCH OF THE TRIBUNAL THAT ISSUE HAS TO BE DECIDED BY THE TRIBUNAL AND IT CANNOT BE REMANDED TO THE AO AS WAS CANVASSED BY THE REVENUE AND HENCE, THIS ARGUMENT HAS NOT MERIT THAT EVEN NOW, THE MATTER SHOULD BE RESTORED BACK TO THE AO FOR FRESH DECISION ALTHOUGH THE SMC BENCH OF THE TRIBUNAL HAS DECIDED THE ISSUE. REGARDING THE JUDGMENT OF HONBLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF CIT VS. HARI NATH AND CO. (SUPRA) ON WHICH RELIANCE WAS PLACED BY LD. DR OF REVENUE, I FIND THAT IN THIS CASE, IT WAS HELD BY HONBLE ALLAHABAD HIGH COURT THAT DECISION OF DIVISION BENCH GIVEN IN AN EARLIER CASE IS BINDING ON ITS SUBSEQUENT BENCH OF THE SAME HIGH COURT. THERE IS NO QUARREL ON THIS ASPECT BUT THIS IS NOT THE CASE OF THE SMC BENCH OF THE TRIBUNAL AS PER THE SUBSEQUENT ORDER THAT THE DECISION OF THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE OF M/S. UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. (SUPRA) IS NOT BINDING ON THE TRIBUNAL WHETHER SMC BENCH OR DIVISION BENCH. AS PER THE SUBSEQUENT DECISION OF THE SMC BENCH OF THE TRIBUNAL, IT WAS HELD THAT AS PER THE EARLIER DECISION OF THE DIVISION BENCH OF THE TRIBUNAL, THE MATTER WAS RESTORED BACK TO THE AO FOR A FRESH DECISION IN THE LIGHT OF KARNATAKA SOUHARDA SAHAKARI ACT, 1997 AND THIS WAS DONE BY CIT (A) AND AO AS DIRECTED BY THE TRIBUNAL AND BECAUSE OF THIS REASON, SMC BENCH OF THE TRIBUNAL HELD THAT NOW THE ISSUE HAS TO BE DECIDED BY THE TRIBUNAL AT ITS OWN LEVEL INSTEAD OF AGAIN RESTORING THE MATTER BACK TO THE FILE OF AO AND AFTER CONSIDERING THE VARIOUS PROVISIONS OF KARNATAKA SOUHARDA SAHAKARI ACT, 1997, THE SMC BENCH OF THE TRIBUNAL CAME TO THE CONCLUSION THAT SOUHARDA CO-OPERATIVES ARE ALSO ONE FORM OF CO- OPERATIVE SOCIETIES REGISTERED UNDER A LAW IN FORCE IN THE STATE OF KARNATAKA FOR REGISTRATION OF CO-OPERATIVE SOCIETIES AND THEREFORE, THE CONCLUSION OF THE REVENUE AUTHORITIES THAT CO- OPERATIVE SOCIETIES AND CO-OPERATIVES ARE DIFFERENT AND THAT CO- OPERATIVE REGISTERED AS SOUHARDA SAHAKARI CANNOT BE REGARDED AS CO-OPERATIVE SOCIETIES IS UNSUSTAINABLE. AFTER HOLDING SO, THE TRIBUNAL RESTORED BACK THE MATTER TO THE AO FOR FRESH DECISION REGARDING ALLOWABILITY OF DEDUCTION U/S. 80P OF THE IT ACT AFTER ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 7 EXAMINING THE FULFILMENT OF OTHER CONDITIONS IN THAT REGARD. FOR READY REFERENCE, WE REPRODUCE PARA NOS. 5 TO 11 OF THIS TRIBUNAL ORDER RENDERED IN THE CASE OF SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA VS. ITO (SUPRA) BY SMC BENCH OF THE TRIBUNAL ON 26.07.2019. THESE PARAS ARE AS UNDER: 5. I HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SOUHARDA SAHAKARI REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 ARE ALSO CO-OPERATIVE SOCIETIES WITHIN THE MEANING OF SEC.2(19) OF THE ACT AND THEREFORE THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE BENEFIT OF DEDUCTION TO THE ASSESSEE. THE LEARNED DR RELIED ON A DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF M/S. MILLENNIUM CREDIT COOPERATIVE SOCIETY LTD. VS. ITO ITA NOS. 2606 & 2607/BANG/2017 IN WHICH THE TRIBUNAL FOLLOWED THE DECISION OF ITAT BANGALORE BENCH IN THE CASE OF M/S. UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. ITA NO.2831/BANG/2017 ORDER DATED 17.8.2018 IN WHICH THE ISSUE WHETHER SOUHARDA REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 CAN BE REGARDED AS CO-OPERATIVE SOCIETY ENTITLED TO BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT WAS REMANDED TO THE AO FOR FRESH CONSIDERATION. WE ARE OF THE VIEW THAT IN THE PRESENT CASE, THE AO AND CIT(A) HAVE ALREADY CONSIDERED THIS ISSUE IN THE LIGHT OF THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 AND THEREFORE THIS ISSUE HAS TO BE DECIDED BY ME AND CANNOT BE REMANDED TO THE AO AS WAS CANVASSED BY THE REVENUE. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. SEC.2(19) DEFINES COOPERATIVE SOCIETIES FOR THE PURPOSE OF THE ACTAND THE SAME IS AS FOLLOWS: DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIRES, (19) 'CO- OPERATIVE SOCIETY' MEANS A CO-OPERATIVE SOCIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 1912 (2 OF 1912), OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF CO-OPERATIVE SOCIETIES: 7. AS CAN BE SEEN FROM THE AFORESAID DEFINITION OF CO- OPERATIVE SOCIETY UNDER THE ACT, ANY CO-OPERATIVE SOCIETY REGISTERED UNDER ANY OTHER LAW OF ANY STATE FOR REGISTRATION OF CO-OPERATIVE SOCIETY IS ALSO REGARDED AS CO-OPERATIVE SOCIETY UNDER THE ACT. SOUHARDAS ALSO OPERATE ON THE PRINCIPLE OF CO-OPERATION AND ADOPT THE PRINCIPLES OF CO-OPERATION. COOPERATIVE SOCIETIES AND ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 8 CO-OPERATIVES ARE ALL FOUNDED ON THE PRINCIPLE OF COOPERATION. 8. SINCE THE BEGINNING OF MANKIND THE CONCEPT OF CO- OPERATION HAS BEEN THE FOUNDATION FOR HARMONIOUS EXISTENCE IN INDIA, THE COOPERATIVE SOCIETIES ACT 1912 REGULATED FORMATION, MANAGEMENT, WINDING UP AND OTHER SUPERVISION BY THE GOVERNMENT ETC. THIS ACT BECAME THE MODEL FOR THE PROVINCIAL GOVERNMENTS TO FORM THEIR OWN COOPERATIVE ACTS. POST-INDEPENDENCE, VARIOUS STATE GOVERNMENTS FRAMED THEIR OWN INDEPENDENT COOPERATIVE ACTS AND THE CENTRAL GOVERNMENT ITS MULTI-STATE COOPERATIVE ACT. ACCORDINGLY, KARNATAKA STATE COOPERATIVE SOCIETIES ACT, 1959 (KSCS ACT, 1959) REGULATES COOPERATIVE SOCIETIES IN THE STATE OF KARNATAKA. A PANCHAYAT, A COOPERATIVE SOCIETY AND A SCHOOL FOR EVERY VILLAGE WERE CONSIDERED AS THE THREE PILLARS OF THE INTEGRATED COMMUNITY DEVELOPMENT. AS TIME PASSED BY, OTHER ASPECTS WERE INCLUDED INTO THE COOPERATIVE ACT THUS HERALDING THE RESURGENCE OF A NEW ERA IN COOPERATIVE MOVEMENT. THE STATE AND THE CENTRAL GOVERNMENTS WERE INVESTING MILLIONS OF RUPEES IN THE FORM OF SHARES, GRANTS, SUBSIDY, CONTRIBUTIONS, GOVERNMENT SUPPORT, ETC., BUT THE EXPECTED RESULTS COULDNT BE ACHIEVED IN COOPERATIVE MOVEMENTS. THIS CONDITION CONTINUED ALMOST UNTIL EARLY 1980S. 9. KEEPING THIS IN MIND, THE CENTRAL GOVERNMENT SETUP A COMMITTEE UNDER THE CHAIRMANSHIP OF SHRI ARDHANARISHWARAN, WHICH SUBMITTED ITS REPORT IN 1987. IT ATTRIBUTED THE FAILURE OF THE COOPERATIVE MOVEMENT TO THE EXCESSIVE INTERFERENCE OF THE GOVERNMENTS. IT IS ALSO TRUE THAT THE UNABATED PARTY POLITICS IN THE CO-OPERATIVE MOVEMENT IS ALSO A BIG HINDRANCE TO ITS PROGRESS. REALIZING THE VITAL ROLE OF THE COOPERATIVE MOVEMENT IN THE PROGRESS OF THE SOCIETY, THE CENTRAL PLANNING COMMISSION SET UP A COMMITTEE BY APPOINTING SHRI CHAUDARI BRAHMAPRAKASH AS ITS HEAD & WITH A TASK OF DRAFTING A MODEL COOPERATIVE ACT WHICH WILL PREVENT INTERFERENCE OF THE GOVERNMENTS. THIS COMMITTEE, AFTER A DETAILED STUDY OF THE COOPERATIVE ACTS OF VARIOUS STATES, DRAFTED A MODEL COOPERATIVE ACT IN 1991 AND CENTRAL GOVERNMENT RECOMMENDED THE STATE GOVERNMENTS TO ADOPT THIS. ACCORDINGLY, IN 1997 A BILL ON PARALLEL COOPERATIVE ACT WAS TABLED IN THE STATE LEGISLATURE OF KARNATAKA. DEMANDING AN EARLY APPROVAL OF THIS BILL BY BOTH THE HOUSES OF KARNATAKA LEGISLATURE, ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 9 A COMMITTEE SOUHARDA SAMVARDHANA SAMITHI UNDER THE CHAIRMANSHIP OF JUSTICE RAMA JOIS CAME INTO EXISTENCE. IT WAS DUE TO THE COMBINED EFFORTS OF SAHAKARA BHARATHI KARNATAKA AND SOUHARDA SAMVARDHANA SAMITHI, THE KARNATAKA SOUHARDA SAHAKARI ACT1997 (KSSA, 1997) WAS PASSED IN THE LEGISLATURE. WITH THE CONSENT OF THE PRESIDENT OF INDIA, IT WAS ENFORCED FROM JANUARY 2001. PREAMBLE TO THE ACT READS THUS:- AN ACT TO PROVIDE FOR RECOGNITION, ENCOURAGEMENT AND VOLUNTARY FORMATION OF CO- OPERATIVES BASED ON SELF-HELP, MUTUAL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBERS AS ACCOUNTABLE, COMPETITIVE, SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY COOPERATIVE PRINCIPLES AND MATTERS CONNECTED THEREWITH; WHEREAS IT IS EXPEDIENT TO PROVIDE FOR RECOGNITION ENCOURAGEMENT AND VOLUNTARY FORMATION OF CO-OPERATIVES BASED ON SELF-HELP, MUTUAL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBERS AS ACCOUNTABLE, COMPETITIVE SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY COOPERATIVE PRINCIPLES AND FOR MATTERS CONNECTED THEREWITH; BE IT ENACTED BY THE KARNATAKA STATE LEGISLATURE IN THE FORTY-EIGHTH YEAR OF REPUBLIC OF INDIA AS FOLLOWS:- 10. THE SOUHARDA COOPERATIVES ENJOY FUNCTIONAL AUTONOMY IN DESIGN AND IMPLEMENTATION OF THEIR BUSINESS PLANS, CUSTOMER SERVICE ACTIVITIES, ETC., BASED ON THE NEEDS OF THEIR MEMBERS. UNLIKE OTHER FORMS OF COOPERATIVES IN INDIA, THE INTERFERENCE OF STATE / CENTRAL IN DAY-TO-DAY OPERATIONS OF SOUHARDA COOPERATIVES IS ALMOST MINIMAL. 11. THE ABOVE DISCUSSION WOULD SHOW THAT SOUHARDA CO- OPERATIVES ARE ALSO ONE FORM OF CO-OPERATIVE SOCIETIES REGISTERED UNDER A LAW IN FORCE IN THE STATE OF KARNATAKA FOR REGISTRATION OF CO-OPERATIVE SOCIETIES. THEREFORE, THE CONCLUSION OF THE REVENUE AUTHORITIES THAT CO-OPERATIVE SOCIETIES AND CO-OPERATIVES ARE DIFFERENT AND THAT CO- OPERATIVE REGISTERED AS SOUHARDA SAHAKARI CANNOT BE REGARDED AS CO-OPERATIVE SOCIETIES IS UNSUSTAINABLE. WE THEREFORE HOLD THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S.80P(2)(A)(I) OF THE ACT, AS THE GROUND ON WHICH THE SAME WAS DENIED TO THE ASSESSEE IS HELD TO BE INCORRECT. HOWEVER, THE OTHER CONDITIONS FOR ALLOWING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT NEEDS TO BE EXAMINED BY THE AO. I, THEREFORE, REMAND THE QUESTION OF ALLOWING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT TO THE AO, EXCEPT THE ISSUE ALREADY DECIDED ABOVE. ITA NO.1207/BANG/2019 M/S.UPPINANGADY CO-OP AGRI. SOCIETY LTD.. 10 5. RESPECTFULLY FOLLOWING THIS TRIBUNAL ORDER, I HOLD THAT THE ASSESSEES CLAIM REGARDING DEDUCTION U/S. 80P(2)(A)(I) CANNOT BE REJECTED ON THIS BASIS THAT ASSESSEE IS A SOUHARDA SAHAKARI AND THEREFORE, CANNOT BE REGARDED AS A CO-OPERATIVE SOCIETY. BUT AFTER HOLDING SO, I SET ASIDE THE ORDER OF LD. CIT(A) AND RESTORE THE MATTER BACK TO THE AO FOR FRESH DECISION REGARDING ALLOWABILITY OF DEDUCTION U/S. 80P(2)(A)(I) OF THE IT ACT AFTER EXAMINING OTHER CONDITIONS FOR ALLOWING SUCH DEDUCTION BECAUSE THOSE CONDITIONS ARE NOT EXAMINED BY THE AO TILL NOW. I ORDERED ACCORDINGLY. 6. SINCE THE ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO THAT OF THE DECISION OF THE TRIBUNAL IN THE CASE OF SINDHU CREDIT SOUHARDA SAHAKARI NIYAMITA (SUPRA), RESPECTFULLY FOLLOWING THE SAME, WE REMIT THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR ADJUDICATION AFRESH, ON SIMILAR LINE. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 27 TH DAY OF FEBRUARY, 2020 . SD/- SD/- (PAVAN KUMAR GADALE) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE ; DATED : 27 TH FEBRUARY, 2020. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-MANGALURU. 4. THE PR.CIT MANGALURU. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE