Sree Seetharama Mandiram, Bangalore V. Income Tax Officer, Ward- 5(2)(2), Bangalore

ITA 24/BANG/2020

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2100 (ITAT-BANGALORE)
• Duration Of Justice: 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2016-2017
• Appeal Filed On: 09-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: STANDING COUNCIL
• Keywords: Opportunity of being heard
• Section: 234B; 80P; 143(2); 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-C BENCH, BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.24/BANG/2020: ASST.YEAR 2016-2017 SREE SEETHARAMA MANDIRA 1067, PRS LANE, ULSOORPET BANGALORE 560 002. PAN: AADTS3925K. VS. THE INCOME TAX OFFICER WARD 5(2)(2) BANGALORE. (APPELLANT) (RESPONDENT) APPELLANT BY: SRI.ZAIN AHMED KHAN, CA RESPONDENT BY : DR.GANESH R.GHALE, STANDING COUNCIL FOR DR DATE OF HEARING : 24.02.2020 DATE OF PRONOUNCEMENT : 27.04.2020 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE CIT(A)-5, BANGALORE, DATED 29.11.2019. THE RELEVANT ASSESSMENT YEAR IS 2016-2017. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO L AW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE ORDER IS PASSED IN HASTE, WITHOUT PROVIDING SUFFICIENT AND REASONABLE OPPORTUNITY OF BEING HEAR D. 3. THE ORDER IS PASSED AGAINST THE PRINCIPLES OF NA TURAL JUSTICE AND THUS LIABLE TO BE QUASHED. 4. THE LD.AO ERRED IN DISALLOWING DEDUCTION U/S 80P OF THE ACT AND THE LD.CIT(A) ERRED IN CONFIRMING THE SAME. 5. THE LD.AO ERRED IN CONCLUDING THAT THE APPELLANT IS NOT A CO-OPERATIVE SOCIETY WITHIN THE MEANING OF SECTION 2(19) AS IT IS REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI AC T. 6. THE LD.AO ERRED IN DENYING DEDUCTION U/S 80P ON THE PREMISE THAT THE APPELLANT HAS APPOINTED NOMINAL ME MBERS AND THE CIT(A) ERRED IN CONFIRMING THE SAME. ITA NO.24/BANG/2020 SREE SEETHARAMA MANDIRAM. 2 7. THE LD.AO ERRED IN DENYING DEDUCTION U/S 80P IN RESPECT OF INTEREST EARNED FROM NATIONALIZED BANKS. 8. THE LD.AO ERRED IN COMPUTING THE TOTAL INCOME OF THE APPELLANT AT RS.44,90,832 IN THE COMPUTATION SHEET. 9. THE LD.AO ERRED IN LEVYING INTEREST U/S 234B & 2 34C OF THE ACT. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE ITSELF HAS DECLARED AS A CO-OPERATIVE PROVIDING FINANCIAL SERVICES AND CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMEN T YEAR 2016- 2017, THE ASSESSEE HAS FILED ITS RETURN OF INCOME E LECTRONICALLY ON 23.09.2016 BY DECLARING TOTAL INCOME OF RS.7,46, 770 AFTER CLAIMING DEDUCTION U/S 80P OF THE ACT, FOR RS.24,77 ,850. THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) OF THE ACT WAS ISSUED AND SERVED ON THE ASSESSEE. IN R ESPONSE TO THE NOTICE U/S 143(2) DATED 26.09.2017 AND SUBSEQU ENT NOTICES U/S 142(1), THE ASSESSEE SUBMITTED THE DETA ILS / INFORMATION CALLED FOR THROUGH E-FILING PORTAL. DUR ING THE COURSE OF SCRUTINY PROCEEDINGS, IT WAS BROUGHT TO T HE NOTICE OF THE ASSESSEE THAT IN VIEW OF THE AMENDED PROVISIONS OF SUB- SECTION (4) OF SECTION 80P OF THE ACT, IT WAS NOT E LIGIBLE FOR DEDUCTION U/S 80P OF THE ACT AND THEREFORE, THE DED UCTION CLAIMED BY THE ASSESSEE TO THE EXTENT OF RS.74,93,2 56 WAS PROPOSED TO BE DISALLOWED AND BROUGHT TO TAX, BY TH E ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE ASSESSING OF FICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A). THE CIT(A) CONFIRMED THE VIEW TAKEN BY THE ASSESSING OF FICER. HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RELEVANT ITA NO.24/BANG/2020 SREE SEETHARAMA MANDIRAM. 3 MATERIAL ON RECORD, I FIND THAT SIMILAR ISSUE CAME UP BEFORE THE ITAT BANGALORE BENCHES IN THE CASE OF SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA V. ITO IN ITA NO.1234/BA NG/ 2019, WHEREIN THE TRIBUNAL VIDE ITS ORDER DATED 26.07.20 19, REMITTED THE MATTER TO THE FILES OF THE ASSESSING O FFICER FOR FRESH CONSIDERATION, BY OBSERVING AS UNDER:- 5. I HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNE D 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 TH E 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 TRIBUNAL FOLLOWED THE DECISION OF ITAT BANGALORE BENCH IN TH E CASE OF M/S. UDAYA SOUHARDA CREDIT CO-OPERATIVE SOCIETY LTD. ITA NO.28 31/BANG/2017 ORDER DATED 17.8.2018 IN WHICH THE ISSUE WHETHER SO UHARDA REGISTERED UNDER THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 CAN BE REGARDED AS CO-OPERATIVE SOCIETY ENTITLED TO BENEFIT OF DEDUCTI ON 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 AL READY CONSIDERED THIS ISSUE IN THE LIGHT OF THE KARNATAKA SOUHARDA SAHAKA RI ACT, 1997 AND THEREFORE THIS ISSUE HAS TO BE DECIDED BY ME AND CA NNOT 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 ACT AN D 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 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 RE GISTERED UNDER ANY OTHER LAW OF ANY STATE FOR REGISTRATION OF CO-OPERA TIVE SOCIETY IS ALSO REGARDED AS CO-OPERATIVE SOCIETY UNDER THE ACT. SOU HARDAS ALSO OPERATE ON THE PRINCIPLE OF CO-OPERATION AND ADOPT THE PRIN CIPLES OF CO-OPERATION. ITA NO.24/BANG/2020 SREE SEETHARAMA MANDIRAM. 4 COOPERATIVE SOCIETIES AND CO-OPERATIVES ARE ALL FOU NDED ON THE PRINCIPLE OF COOPERATION. 8. SINCE THE BEGINNING OF MANKIND THE CONCEPT OF CO-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 B ECAME THE MODEL FOR THE PROVINCIAL GOVERNMENTS TO FORM THEIR OWN COOPER ATIVE 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 COOPE RATIVE SOCIETIES ACT, 1959 (KSCS ACT, 1959) REGULATES CO-OPERATIVE S OCIETIES IN THE STATE OF KARNATAKA. A PANCHAYAT, A COOPERATIVE SOCIETY AN D 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 GOV ERNMENTS WERE INVESTING MILLIONS OF RUPEES IN THE FORM OF SHARES, GRANTS, SUBSIDY, CONTRIBUTIONS, GOVERNMENT SUPPORT, ETC., BUT THE EX PECTED RESULTS COULDNT BE ACHIEVED IN COOPERATIVE MOVEMENTS. THIS CONDITIO N CONTINUED ALMOST UNTIL EARLY 1980S. 9. KEEPING THIS IN MIND, THE CENTRAL GOVERNMENT SE TUP 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 IN TERFERENCE OF THE GOVERNMENTS. IT IS ALSO TRUE THAT THE UNABATED PART Y POLITICS IN THE CO- OPERATIVE MOVEMENT IS ALSO A BIG HINDRANCE TO ITS P ROGRESS. REALIZING THE VITAL ROLE OF THE COOPERATIVE MOVEMENT IN THE PROGR ESS OF THE SOCIETY, THE CENTRAL PLANNING COMMISSION SET UP A COMMITTEE BY A PPOINTING 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 COOPE RATIVE ACTS OF VARIOUS STATES, DRAFTED A MODEL COOPERATIVE ACT IN 1991 A ND CENTRAL GOVERNMENT RECOMMENDED THE STATE GOVERNMENTS TO ADO PT 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 COMM ITTEE SOUHARDA SAMVARDHANA SAMITHI UNDER THE CHAIRMANSHIP OF JUST ICE RAMA JOIS CAME INTO EXISTENCE. IT WAS DUE TO THE COMBINED EFF ORTS 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 REA DS 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 ACCOUNT ABLE, COMPETITIVE, SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY CO- OPERATIVE PRINCIPLES AND MATTERS CONNECTED THEREWIT H; WHEREAS ITA NO.24/BANG/2020 SREE SEETHARAMA MANDIRAM. 5 IT IS EXPEDIENT TO PROVIDE FOR RECOGNITION ENCOURAG EMENT AND VOLUNTARY FORMATION OF CO-OPERATIVES BASED ON SELF- HELP, MUTUAL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBER S AS ACCOUNTABLE, COMPETITIVE SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY CO-OPERATIVE PRINCIPLES AND FOR MATTERS C ONNECTED THEREWITH; BE IT ENACTED BY THE KARNATAKA STATE LEG ISLATURE IN THE FORTY-EIGHTH YEAR OF REPUBLIC OF INDIA AS FOLLOWS:- 10. THE SOUHARDA COOPERATIVES ENJOY FUNCTIONAL AUT ONOMY 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 CO-OPERATIVES ARE ALSO ONE FORM OF CO-OPERATIVE SOCIETIES REGISTE RED 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-OPERA TIVE SOCIETIES IS UNSUSTAINABLE. WE THEREFORE HOLD THAT THE ASSESSEE SHOULD BE ALLOWED DEDUCTION U/S.80P(2)(A)(I) OF THE ACT, AS THE GROUN D 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 QUESTI ON OF ALLOWING DEDUCTION U/S. 80P(2)(A)(I) OF THE ACT TO THE AO, E XCEPT THE ISSUE ALREADY DECIDED ABOVE. 12. IN THE RESULT, APPEAL BY THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. 5. BOTH THE PARTIES FAIRLY CONCEDED THAT THE ISSUE UNDER CONSIDERATION IS SIMILAR TO THAT OF THE ISSUE CONSI DERED BY THE TRIBUNAL IN THE CASE OF SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA V. ITO (SUPRA) . THEREFORE, RESPECTFULLY FOLLOWING THE SAME, I REMIT THE ISSUE TO THE FILE OF THE ASSESSIN G OFFICER TO ADJUDICATION AFRESH, ON SIMILAR LINES, AFTER ALLOWI NG A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ITA NO.24/BANG/2020 SREE SEETHARAMA MANDIRAM. 6 ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2020. SD/- ( CHANDRA POOJARI ) ACCOUNTANT MEMBER BANGALORE ; DATED : 27 TH APRIL, 2020. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-5, BANGALORE. 4. THE PR.CIT-5, BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE