M/s. Siddartha Pattina Souharda Sahakari Niyamita, Manvi V. Income Tax Officer, Ward - 5, Raichur

ITA 1234/BANG/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7503 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 29-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.G. GANESH
• Assessee Lawyers: CHAITANYA V. MUDRABETTU

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC C BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT ITA NO. 1234/BANG/2019 ASSESSMENT YEAR : 2016 - 17 SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA, V H COMPLEX, I B ROAD, MANVI 584 123. P AN: AAIAS 1911K VS. THE INCOME TAX OFFICER, WARD 5, RAICHUR. APP ELLANT RESPONDENT APP ELLANT BY : SHRI CH A ITANYA V. MUDRABETTU, A DVO CATE RESPONDENT BY : SHRI R.G . GANESH, S T ANDING COUNSEL FOR DEPT. DATE O F HEARING : 24.07.2019 DATE OF PRONOUNCEMENT : 26 .07.2019 O R D E R THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORD ER DATED 29.03.2019 OF THE CIT(APPEALS), KALABURGI RELATING TO ASSESSMENT YEAR 2016-17. 2. THE ASSESSEE IS A CO-OPERATIVE SOCIETY PROVIDIN G A CREDIT FACILITIES TO ITS MEMBER. IN THE RETURN OF INCOME IS FILED FOR T HE ASST. YEAR 2016-17, THE ASSESSEE CLAIMED DEDUCTION OF SUM OF RS. RS.27,60,5 85/- U/S 80P(2)(A)(I) OF THE INCOME TAX ACT, 1961 (ACT). 3. UNDER SEC.80P(2)(A)(I) OF THE ACT, WHERE THE GRO SS TOTAL INCOME OF A CO-OPERATIVE SOCIETY INCLUDES INCOME FROM CARRYING ON THE BUSINESS OF ITA NO. 1234/BANG/2019 PAGE 2 OF 7 BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBE RS, THE SAME IS ALLOWED DEDUCTION. ACCORDING TO THE AO, THE BENEFIT OF DED UCTION U/S.80P(2)(A)(I) OF THE ACT WAS AVAILABLE ONLY TO A CO-OPERATIVE SOCIET Y AND SINCE THE ASSESSEE IS ONLY A SOUHARDA SAHAKARI REGISTERED UND ER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 AND SINCE UNDER THE SAI D ACT, CO-OPERATIVE SOCIETIES ARE NOT BEING REGISTERED, THE ASSESSEE SH OULD NOT BE ALLOWED THE BENEFIT OF DEDUCTION U/S.80P(2)(A)(I) OF THE ACT. ACCORDING TO THE AO, CO- OPERATIVE AND CO-OPERATIVE SOCIETIES ARE 2 DIFFEREN T ENTITIES. IF THE CO- OPERATIVE WANTS TO CONVERT ITSELF INTO A CO-OPERATI VE SOCIETY, IT HAS TO BE CONVERTED AS PER THE AMENDED PROVISIONS OF KARNATAK A SOUHARDA SAHAKARI ACT,1997 AS AMENDED BY ACT 13/2004. SIMILARLY, UND ER THE KARNATAKA CO- OPERATIVE SOCIETIES ACT, 1959 CO-OPERATIVE HAS BE EN DEFINED ACCORDING TO WHICH THE CO-OPERATIVE MEANS A CO-OPERATIVE REGISTE RED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997. THE AO HAS MADE REFERENCE TO THE FACT THAT UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 THE WORD CO-OPERATIVE HAS BEEN DEFINED IN CLAUSE 2(E) ACCORD ING TO WHICH CO- OPERATIVE MEANS A CO-OPERATIVE INCLUDING A CO-OPERA TIVE BANK DOING THE BUSINESS OF BANKING REGISTERED OR DEEMED TO BE REGI STERED UNDER SECTION 5 AND WHICH HAS THE WORD SOUHARDA SAHAKARI IN ITS NAM E. IN SOUHARDA SAHAKARI ACT, THE WORD CO-OPERATIVE SOCIETY HAS ALS O BEEN DEFINED IN CLAUSE 2(G), ACCORDING TO WHICH THE CO-OPERATIVE SO CIETY MEANS A CO- OPERATIVE SOCIETY REGISTERED UNDER THE KARNATAKA CO -OPERATIVE SOCIETIES ACT, 1959. THUS, ACCORDING TO THE AO, IF BOTH THE A CTS ARE READ JOINTLY, IT WOULD BE VERY CLEAR THAT THE CO-OPERATIVE AND CO-OP ERATIVE SOCIETIES ARE TWO DIFFERENT ENTITIES. THE BENEFIT OF DEDUCTION C AN ONLY BE GIVEN TO THE CO- OPERATIVE SOCIETIES AND NOT TO THE CO-OPERATIVE. TH EREFORE, THE ASSESSEE IS NOT EVEN ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80P(2) OF THE ACT. ITA NO. 1234/BANG/2019 PAGE 3 OF 7 4. ON APPEAL BY THE ASSESSEE, THE CIT(A) CONCURRED WITH THE VIEW OF THE AO. AGGRIEVED BY THE ORDER OF THE CIT(A), THE A SSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. I HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SOUHARDA SAHAKARI REGISTERE D UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 ARE ALSO CO-O PERATIVE SOCIETIES WITHIN THE MEANING OF SEC.2(19) OF THE ACT AND THER EFORE THE REVENUE AUTHORITIES WERE NOT JUSTIFIED IN DENYING THE BENEF IT OF DEDUCTION TO THE ASSESSEE. THE LEARNED DR RELIED ON A DECISION OF T HE ITAT BANGALORE BENCH IN THE CASE OF M/S. MILLENNIUM CREDIT CO-OPER ATIVE SOCIETY LTD. VS. ITO ITA NOS. 2606 & 2607/BANG/2017 IN WHICH THE TRI BUNAL FOLLOWED THE DECISION OF ITAT BANGALORE BENCH IN THE CASE OF M/S . UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. ITA NO.2831/BANG/2 017 ORDER DATED 17.8.2018 IN WHICH THE ISSUE WHETHER SOUHARDA REGIS TERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 CAN BE REGARD ED 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 CONSID ERED 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 REMANDE D TO THE AO AS WAS CANVASSED BY THE REVENUE. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. SEC.2( 19) DEFINES CO- OPERATIVE SOCIETIES FOR THE PURPOSE OF THE ACT AND THE SAME IS AS FOLLOWS: DEFINITIONS. 2. IN THIS ACT, UNLESS THE CONTEXT OTHERWISE REQUIR ES, (19) 'CO-OPERATIVE SOCIETY' MEANS A CO-OPERATIVE SO CIETY REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT, 19 12 (2 OF ITA NO. 1234/BANG/2019 PAGE 4 OF 7 1912), OR UNDER ANY OTHER LAW FOR THE TIME BEING IN FORCE IN ANY STATE FOR THE REGISTRATION OF CO-OPERATIVE SOCIETIE S ; 7. AS CAN BE SEEN FROM THE AFORESAID DEFINITION OF CO-OPERATIVE SOCIETY UNDER THE ACT, ANY CO-OPERATIVE SOCIETY RE GISTERED UNDER ANY OTHER LAW OF ANY STATE FOR REGISTRATION OF CO-OPERATIVE S OCIETY IS ALSO REGARDED AS CO-OPERATIVE SOCIETY UNDER THE ACT. SOUHARDAS ALS O OPERATE ON THE PRINCIPLE OF CO-OPERATION AND ADOPT THE PRINCIPLES OF CO-OPERATION. CO- OPERATIVE SOCIETIES AND CO-OPERTIVES ARE ALL FOUNDE D ON THE PRINCIPLE OF CO- OPERATION. 8. SINCE THE BEGINNING OF MANKIND THE CONCEPT OF C O-OPERATION HAS BEEN THE FOUNDATION FOR HARMONIOUS EXISTENCE IN IND IA, THE CO-OPERATIVE 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 COOPERATIV E ACTS. POST- INDEPENDENCE, VARIOUS STATE GOVERNMENTS FRAMED THEI R OWN INDEPENDENT COOPERATIVE ACTS AND THE CENTRAL GOVERNMENT ITS MUL TI-STATE COOPERATIVE ACT. ACCORDINGLY, KARNATAKA STATE COOPERATIVE SOCIE TIES ACT, 1959 (KSCS ACT, 1959) REGULATES CO-OPERATIVE SOCIETIES IN THE STATE OF KARNATAKA. A PANCHAYAT, A COOPERATIVE SOCIETY AND A SCHOOL FOR E VERY VILLAGE WERE CONSIDERED AS THE THREE PILLARS OF THE INTEGRATED C OMMUNITY DEVELOPMENT. AS TIME PASSED BY, OTHER ASPECTS WERE INCLUDED INTO THE COOPERATIVE ACT THUS HERALDING THE RESURGENCE OF A NEW ERA IN COOPE RATIVE MOVEMENT. THE STATE AND THE CENTRAL GOVERNMENTS WERE INVESTING MI LLIONS OF RUPEES IN THE FORM OF SHARES, GRANTS, SUBSIDY, CONTRIBUTIONS, GOV ERNMENT SUPPORT, ETC., BUT THE EXPECTED RESULTS COULDNT BE ACHIEVED IN CO OPERATIVE MOVEMENTS. THIS CONDITION CONTINUED ALMOST UNTIL EARLY 1980S. 9. KEEPING THIS IN MIND, THE CENTRAL GOVERNMENT SET UP A COMMITTEE UNDER THE CHAIRMANSHIP OF SHRI ARDHANARISHWARAN, WH ICH SUBMITTED ITS REPORT IN 1987. IT ATTRIBUTED THE FAILURE OF THE CO OPERATIVE MOVEMENT TO THE ITA NO. 1234/BANG/2019 PAGE 5 OF 7 EXCESSIVE INTERFERENCE OF THE GOVERNMENTS. IT IS AL SO 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 COOPERAT IVE MOVEMENT IN THE PROGRESS OF THE SOCIETY, THE CENTRAL PLANNING COMMI SSION 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 DETAILE D STUDY OF THE COOPERATIVE ACTS OF VARIOUS STATES, DRAFTED A MODE L COOPERATIVE ACT IN 1991 AND CENTRAL GOVERNMENT RECOMMENDED THE STATE G OVERNMENTS 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, A COMMITTEE SOUHARDA SAMVARDHANA SAMITHI UNDER THE CHAIRMANSHIP OF JUST ICE RAMA JOIS CAME INTO EXISTENCE. IT WAS DUE TO THE COMBINED EFFORTS OF SAHAKARA BHARATHI KARNATAKA AND SOUHARDA SAMVARDHANA SAMITHI, THE KA RNATAKA SOUHARDA SAHAKARI ACT1997 (KSSA, 1997) WAS PASSED IN THE L EGISLATURE. 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 A ND VOLUNTARY FORMATION OF CO-OPERATIVES BASED ON SELF-HELP, MUTU AL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBERS AS ACCOUNTABLE, COMPETITIVE, SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY CO-OPERATIVE PRINCIPLES AND MATTERS CONNE CTED THEREWITH; WHEREAS IT IS EXPEDIENT TO PROVIDE FOR R ECOGNITION ENCOURAGEMENT AND VOLUNTARY FORMATION OF CO-OPERATI VES BASED ON SELF-HELP, MUTUAL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBERS AS ACCOUNTABLE, COMPETITIVE SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY CO-OPERATIVE PRINCIP LES AND FOR MATTERS CONNECTED THEREWITH; BE IT ENACTED BY THE K ARNATAKA STATE LEGISLATURE IN THE FORTY-EIGHTH YEAR OF REPUB LIC OF INDIA AS FOLLOWS:- ITA NO. 1234/BANG/2019 PAGE 6 OF 7 10. THE SOUHARDA COOPERATIVES ENJOY FUNCTIONAL AUTO NOMY IN DESIGN AND IMPLEMENTATION OF THEIR BUSINESS PLANS, CUSTOME R SERVICE ACTIVITIES, ETC., BASED ON THE NEEDS OF THEIR MEMBERS. UNLIKE O THER FORMS OF COOPERATIVES IN INDIA, THE INTERFERENCE OF STATE / CENTRAL IN DAY-TO-DAY OPERATIONS OF SOUHARDA COOPERATIVES IS ALMOST MINIM AL. 11. THE ABOVE DISCUSSION WOULD SHOW THAT SOUHARDA C O-OPERATIVES ARE ALSO ONE FORM OF CO-OPERATIVE SOCIETIES REGISTERED UNDER A LAW IN FORCE IN THE STATE OF KARNATAKA FOR REGISTRATION OF CO-OPERA TIVE SOCIETIES. THEREFORE THE CONCLUSION OF THE REVENUE AUTHORITIES THAT CO-O PERATIVE SOCIETIES AND CO-OPERATIVES ARE DIFFERENT AND THAT CO-OPERATIVE R EGISTERED AS SOUHARDA SAHAKARI CANNOT BE REGARDED AS CO-OPERATIVE SOCIETI ES IS UNSUSTAINABLE. WE THEREFORE HOLD THAT THE ASSESSEE SHOULD BE ALLOW ED 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 NEE DS 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. 12. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 26 TH DAY OF JULY, 2019. SD/- ( N.V. VASUDEVAN ) VICE PRESIDENT BANGALORE, DATED, THE 26 TH JULY, 2019. / D ESAI S MURTHY / ITA NO. 1234/BANG/2019 PAGE 7 OF 7 COPY TO: 1. APPELLANT 2. RESPONDEN T 3. CIT 4. CIT(A) 5. DR, ITAT, BA NGALORE. 6. GUARD FIL E BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.