M/s. Yashaswini Mahila Souhardha Credit Co-operative Limited, Bangalore V. Income Tax Officer, Ward- 6(2)(3), Bangalore

ITA 159/BANG/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1915 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 03-02-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: GURUPRASAD
• Section: 143(3); 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES SMC-C, BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.159/BANG/2020 : ASST.YEAR 2016-2017 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OPERATIVE LIMITED, NO.107, PIPELINE ROAD, OFFICERS MODEL COLONY T.DASARAHALLI BANGALORE 560 057. PAN : AAAAY1386L. V. THE INCOME TAX OFFICER WARD 7(2)(3) BANGALORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.GURUPRASAD, ADVOCATE RESPONDENT BY : SRI.GANESH R.GHALE, STANDING COUNSEL DATE OF HEARING : 04.03.2021 DATE OF PRONOUNCEMENT : 04.03.2021 O R D E R THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST CIT(A)S ORDER DATED 10.12.2019. THE RELEVANT ASSESSMENT YEAR IS 2016-2017. 2. THE SOLITARY ISSUE RAISED IS WHETHER THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE OF CLAIM OF DEDUCTION MADE BY THE ASSESSING OFFICER U/S 80P2(A)(I) OF THE I.T.ACT. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOW: THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE PROVISIONS OF KARNATAKA SOUHARDA SAHAKARI ACT, 1997. IT IS ENGAGED IN THE BUSINESS OF PROVIDING CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2016-2017, THE RETURN OF INCOME WAS FILED ON 11.07.2017 DECLARING TOTAL INCOME OF RS.4,15,770 AFTER CLAIMING DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT, AMOUNTING TO RS.45,13,400. THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 28.12.2018 U/S 143(3) OF THE I.T.ACT. IN THE ASSESSMENT ORDER ITA NO.159/BANG/2020 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OP LTD. 2 COMPLETED, THE ASSESSING OFFICER DENIED THE CLAIM OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER IN DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE FIRST APPELLATE AUTHORITY CONFIRMED THE A.O.S ACTION IN DENYING THE CLAIM OF DEDUCTION U/S 80P(2) OF THE I.T.ACT. THE FIRST APPELLATE AUTHORITY WAS OF THE VIEW THAT SINCE THE ASSESSEE IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997, THE SAME CANNOT BE TERMED AS A CO-OPERATIVE SOCIETY COMING WITHIN THE DEFINITION OF SECTION 2(19) OF THE I.T.ACT, AND HENCE, DEDUCTION U/S 80P(2) CANNOT BE GRANTED. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE IN QUESTION IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S.SWABHIMANI SOUHARDA CREDIT CO-OPERATIVE LTD. V. GOVERNMENT OF INDIA REPORTED IN 421 ITR 670 (KAR.). THIS JUDGMENT OF THE HONBLE HIGH COURT WAS FOLLOWED IN THE CASE OF SHRI V.S.P.SAHAKARI NIYAMIT V. UOI REPORTED IN 426 ITR 457 (KAR.) 6. THE LEARNED STANDING COUNSEL RELIED ON THE ORDERS PASSED BY THE INCOME TAX AUTHORITIES. 7. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE REASON FOR THE A.O. AND THE FIRST APPELLATE AUTHORITY TO DECIDE THE APPEAL AGAINST THE ASSESSEE ITA NO.159/BANG/2020 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OP LTD. 3 WAS THAT THE ASSESSEE WAS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997, AND THEREFORE, WAS NOT A CO- OPERATIVE SOCIETY WITHIN THE PURVIEW OF SECTION 2(19) OF THE I.T.ACT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF M/S.SWABHIMANI SOUHARDA CREDIT CO-OPERATIVE LTD. (SUPRA) HAD DECIDED AN IDENTICAL ISSUE AND HELD THAT THE ENTITIES REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997, FIT INTO THE DEFINITE TERM CO-OPERATIVE SOCIETY. THE RELEVANT FINDING THE HONBLE KARNATAKA HIGH COURT READS AS FOLLOW:- IN THE ABOVE CIRCUMSTANCES, THESE WRIT PETITIONS SUCCEED; A DECLARATION IS MADE TO THE EFFECT THAT THE ENTITIES REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 FIT INTO THE DEFINITION OF CO-OPERATIVE SOCIETY AS ENACTED IN SEC.2(19) OF THE INCOME TAX ACT, 1961 AND THEREFORE SUBJECT TO ALL JUST EXCEPTIONS, PETITIONERS ARE ENTITLED TO STAKE THEIR CLAIM FOR THE BENEFIT OF SEC.80P OF THE SAID ACT, A WRIT OF CERTIORARI ISSUES QUASHING THE IMPUGNED NOTICE DATED 30.03.2018 AT ANNEXURE- D IN W.P.NO.48414/2018; OTHER LEGAL CONSEQUENCES ACCORDINGLY DO FOLLOW. 8. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN THE CASE OF SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA V. ITO IN ITA NO.1234/NANG/2019 (ORDER DATED 26.07.2019). THE RELEVANT FINDING OF THE TRIBUNAL READS AS FOLLOW:- 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. SEC.2(19) DEFINES COOPERATIVE SOCIETIES FOR THE PURPOSE OF THE ACT AND 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 ITA NO.159/BANG/2020 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OP LTD. 4 CO-OPERATION AND ADOPT THE PRINCIPLES OF CO-OPERATION. COOPERATIVE SOCIETIES AND 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 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 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 CO-OPERATIVE 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, 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 CO-OPERATIVE 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 ITA NO.159/BANG/2020 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OP LTD. 5 CO-OPERATIVE 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. 12. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. THE ASSESSING OFFICER IN THE IMPUGNED ASSESSMENT ORDER HAD CLEARLY HELD THAT THE ASSESSEE IS PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND INTEREST PAID TO MEMBERS ON THEIR DEPOSITS. IT IS FURTHER STATED BY THE A.O. THAT THE ENTIRE INTEREST INCOME RECEIVED IS OUT OF OPERATIONAL INCOME OF THE ASSESSEE. AS MENTIONED EARLIER, THE SOLITARY REASON FOR DENYING THE CLAIM OF DEDUCTION U/S 80P(2) WAS THAT THE ASSESSEE CANNOT BE TERMED AS A COOPERATIVE SOCIETY COMING WITHIN THE DEFINITION OF SECTION 2(19) OF THE I.T.ACT SINCE IT IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997. SINCE I HAVE HELD IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENT THAT THE ASSESSEE IS A COOPERATIVE SOCIETY THOUGH IT IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997, I ALLOW THE APPEAL OF THE ASSESSEE. IT IS ORDERED ACCORDINGLY. ITA NO.159/BANG/2020 M/S.YASHASWINI MAHILA SOUHARDA CREDIT CO-OP LTD. 6 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 04 TH DAY OF MARCH, 2021 . SD/- ( GEORGE GEORGE K ) JUDICIAL MEMBER BANGALORE; DATED : 04 TH MARCH, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-6, BANGALORE. 4. THE PR.CIT-6, BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE