Sri. Siddhi Souharda Sahakari Niyamitha, Bangalore V. Income Tax Officer, Ward- 6(3)(2), Bangalore

ITA 2460/BANG/2019

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2104 (ITAT-BANGALORE)
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2016-2017
• Appeal Filed On: 02-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard; Principle of natural justice
• Section: 234B; 80P; 250; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH, BANGALORE BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER ITA NO.2460/BANG/2019: ASST.YEAR 2016-2017 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA, DOOR NO.137, 1 ST FLOOR, CQAL LAYOUT, 60FT ROAD, OPPOSITE UCO BANK, SAHAKAR NAGAR BANGALORE 560 092. PAN: AAMAS6980J. VS. THE INCOME TAX OFFICER WARD 6(3)(2) BANGALORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.NARENDRA SHARMA, ADVOCATE 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)-6, BANGALORE, DATED 30.09.2019. THE RELEVANT ASSESSMENT YEAR IS 2016-2017. 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS:- 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME -TAX (APPEALS)-6, PASSED UNDER SECTION 250 OF THE INCOME TAX ACT FOR AY 2016-2017 IN SO FAR AS IT IS AGAINST THE APP ELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, NATURAL JUSTICE , PROBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPEL LANTS CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO BE ASSESSE D TOTAL INCOME OF RS.41,77,576/- AS AGAINST RETURNED INCOME OF RS.4,43,300/- ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW IN C ONFIRMING THE DISALLOWANCE OF RS.37,34,296/- UNDER THE PROVIS ION OF SECTION 80P(2)(A)(I) OF THE ACT ON THE FACTS AND CI RCUMSTANCES OF THE CASE. ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 2 4. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN HOLDING THAT THE APPELLANT WAS REGISTERED AS A CO-OPERATIVE AND NOT AS A CO- OPERATIVE SOCIETY, WHICH IS AN INCORRECT APPRECIATI ON OF THE CONSTITUTION OF THE APPELLANT AND THAT THERE WERE N O PROVISION FOR REGISTRATION AS A CO-OPERATIVE AS ASSUMED BY THE AUTHORITIES BELOW, ON THE FACTS AND CIRCUMSTANCES O F THE CASE. 5. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN IGNORING THE PLAIN DEFINITION OF SECTION 2(19) OF THE INCOME TAX ACT, WHICH CLASSIFIES ALL SUCH INSTITUTIONS REGISTERED UNDER D IFFERENT CO- OPERATIVE ACTS IN THE STATE TO BE CO-OPERATIVE SOCI ETIES, THUS MAKING THEM ENTITLED TO THE BENEFIT OF SECTION 80P OF THE ACT, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 6. THE AUTHORITIES BELOW FAILED TO APPRECIATE THAT THE JOINT REGISTRAR OF CO-OPERATIVE SOCIETIES IS EMPOWERED TO REGISTER ONLY CO-OPERATIVE SOCIETIES AND HENCE THERE COULD H AVE BEEN NO REGISTRATION OF THE APPELLANT AS A CO-OPERATIVE, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 7. THE AUTHORITIES BELOW HAVE ATTEMPTED TO NARROW T HE DEFINITION OF SECTION 2(19) OF THE ACT, TO HOLD THA T ONLY ASSESSEES REGISTERED UNDER THE CO-OPERATIVE SOCIET IES ACT, 1959, WERE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTIO N 80P OF THE ACT, WHICH IS CONTRARY TO THE INTENT OF THE DEFINIT ION, ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 8. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN CONFIRMI NG THE ACTION OF THE A.O. IN ASSESSING THE APPELLANT IN TH E STATUS OF THE AOP, WHEN THE APPELLANT HAS FILED THE RETURN UN DER THE STATUS OF CO-OPERATIVE SOCIETY AND NO NOTICE HAS BE EN ISSUED TO ASSESS THE APPELLANT UNDER THE STATUS OF AOP AND HE NCE THE ORDER PASSED WAS BAD IN LAW, ON THE FACTS AND CIRCU MSTANCES OF THE CASE. 9. THE LEARNED CIT(A) WAS NOT JUSTIFIED IN LAW AND ON FACTS IN NOT FOLLOWING A BINDING DECISION OF THE JURISDIC TIONAL TRIBUNAL, WHICH WAS RENDERED SUBSEQUENT TO THE DECI SION RELIED UPON BY THE CIT(A), WITHOUT APPRECIATING THE REASONING ARRIVED AT IN THE DECISION, ON THE FACTS AND CIRCUM STANCES OF THE CASE. 10. THE FINDINGS OF THE LEARNED COMMISSIONER OF INC OME-TAX (APPEALS) IN THE ORDER PASSED ARE NOT IN ACCORDANCE WITH THE LAW AND CONSEQUENTLY THE ORDER IS REQUIRED TO BE QU ASHED ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 11. THE APPELLANT DENIES THE LIABILITY TO PAY INTER EST UNDER SECTION 234B AND 234C OF THE ACT, IN VIEW OF THE FA CT THAT THERE ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 3 IS NO LIABILITY TO ADDITIONAL TAX AS DETERMINED BY THE ASSESSING OFFICER. WITHOUT PREJUDICE, THE RATE, PERIOD AND ON WHAT QUANTUM THE INTEREST HAS BEEN LEVIED ARE NOT IN ACC ORDANCE WITH THE LAW AND ARE NOT DISCERNIBLE FROM THE ORDER AND HENCE DESERVES TO BE CANCELLED ON THE FACTS AND CIRCUMSTA NCES OF THE CASE. 12. THE APPELLANT CRAVES LEAVE OF THIS HONBLE TRIB UNAL, TO ADD, ALTER, DELETE, AMEND OR SUBSTITUTE ANY OR ALL THE ABOVE GROUNDS OF APPEAL AS MAY BE NECESSARY AT THE TIME O F HEARING. 13. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED A T THE TIME OF HEARING OF APPEAL, THE APPELLANT PRAYS THAT THE APPEAL MAY BE ALLOWED FOR THE ADVANCEMENT OF SUBSTANTIAL C AUSE OF JUSTICE AND EQUITY. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASS ESSEE IS CO- OPERATIVE REGISTERED UNDER THE KARNATAKA SOUHARDA S AHAKARI ACT, 1997. IT IS ENGAGED IN PROVIDING FINANCIAL SER VICES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2016-2017, THE ASS ESSEE HAS FILED ITS RETURN OF INCOME ON 04.08.2016 ELECTRONIC ALLY DECLARING A TOTAL INCOME OF RS.4,43,300, AFTER CLAIMING DEDUC TION U/S 80P(2)(A)(I) OF THE I.T.ACT TO THE TUNE OF RS.37,34 ,296. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CAS S AND STATUTORY NOTICES WERE ISSUED TO THE ASSESSEE. DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSEE FURNISHED A LE TTER ISSUED BY THE REGISTRAR OF CO-OPERATIVE SOCIETIES, KARNATA KA STATE, BENGALURU DATED 11.10.2018 ADDRESSED TO THE MANAGIN G DIRECTOR, KARNATAKA STATE SOUHARDA FEDERAL CO-OPERA TIVE LIMITED, BENGALURU, CLARIFYING THAT SOUHARDA CO-OPE RATIVES COULD BE REGARDED AS CO-OPERATIVE SOCIETIES. HOWEVE R, AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIO NS OF THE ASSESSEE, THE AO COMPLETED THE ASSESSMENT, DENYING THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 80P(20(A)(I) OF THE ACT TO THE TUNE OF RS.37,34,296 BY HOLDING THAT THE ASSESS EE WAS ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 4 REGISTERED UNDER THE KARNATAKA SOUHARDA ACT OF 1997 UNDER WHICH ONLY CO-OPERATIVES AND CO-OPERATIVE SOCIETIES WERE REGISTERED. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, 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 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 26.07.201 9, 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. ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 5 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. 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 COOPERATIVE SOCIETIE S 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 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 INT ERFERENCE 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 COOPERATIV E ACTS OF VARIOUS STATES, DRAFTED A MODEL COOPERATIVE ACT IN 1991 AND CENTR AL GOVERNMENT RECOMMENDED THE STATE GOVERNMENTS TO ADOPT THIS. AC CORDINGLY, 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 SAM VARDHANA SAMITHI ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 6 UNDER THE CHAIRMANSHIP OF JUSTICE RAMA JOIS CAME IN TO EXISTENCE. IT WAS DUE TO THE COMBINED EFFORTS OF SAHAKARA BHARATHI KA RNATAKA AND SOUHARDA SAMVARDHANA SAMITHI, THE KARNATAKA SOUHAR DA SAHAKARI ACT1997 (KSSA, 1997) WAS PASSED IN THE LEGISLATUR E. WITH THE CONSENT OF THE PRESIDENT OF INDIA, IT WAS ENFORCED FROM JAN UARY 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 ACCOUNT ABLE, COMPETITIVE, SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY CO- OPERATIVE PRINCIPLES AND MATTERS CONNECTED THEREWIT H; WHEREAS 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 ITA NO.2460/BANG/2019 SRI SIDDHI SOUHARDA SAHAKARI NIYAMITHA. 7 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. 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)-6, BANGALORE. 4. THE PR.CIT-6, BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE