Shri Mathaji Vividoddesha Souharda Sahakari Niyamitha, Bengaluru V. Income Tax Officer, Ward- 2(2)(1), Bangalore

ITA 360/BANG/2021

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5732 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2017-2018
• Appeal Filed On: 26-07-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 234B; 80P; 2(19)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE SMC-A BENCH, BANGALORE BEFORE SHRI GEORGE GEORGE K, JUDICIAL MEMBER ITA NO.360/BANG/2021: ASST.YEAR 2017-2018 SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHAKARI NIYAMITHA NO.126, I MAIN, SHESHADRIPURAM BANGALORE 560 020. PAN : AAGAS8784A. V. THE INCOME TAX OFFICER WARD 2(2)(1) BANGALORE. (APPELLANT) (RESPONDENT) APPELLANT BY : SRI.PRAKASH HEGDE, CA RESPONDENT BY : SRI.GANESH R.GHALE, STANDING COUNSEL DATE OF HEARING : 14.09.2021 DATE OF PRONOUNCEMENT : 20.09.2021 O R D E R THIS APPEAL AT THE INSTANCE OF THE ASSESSEE IS DIRECTED AGAINST THE CIT(A)S ORDER DATED 07.06.2021. THE RELEVANT ASSESSMENT YEAR IS 2017-2018. 2. THE GROUNDS RAISED READ AS FOLLOWS:- THE GROUNDS MENTIONED HEREINAFTER ARE WITHOUT PREJUDICE TO ONE ANOTHER. 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] ERRED ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW BY CONFIRMING THE ASSESSMENT ORDER PASSED BY THE LEARNED ASSESSING OFFICER (AO). 2. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO WHO HAD HELD THAT THE APPELLANT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT SINCE IT IS REGISTERED UNDER THE KARNATAKA SOUHARDHA SAHAKARI ACT, 1997. 3. THE LEARNED CIT(A) HAS ERRED IN DISALLOWING THE APPEAL OF THE APPELLANT BY HOLDING THAT THE APPELLANT IS A CO-OPERATIVE BANK (THOUGH THE APPELLANT IS ONLY A CO-OPERATIVE SOCIETY) AND THEREFORE, IT IS NOT ENTITLED FOR DEDUCTION UNDER SECTION 80P OF THE INCOME TAX ACT. ITA NO.360/BANG/2021. SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHKARI NIYAMITHA. 2 4. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF THE LEARNED AO WHO HAS LEVIED INTEREST UNDER SECTION 234B AND 234C OF THE ACT THOUGH THE SAME SHOULD NOT HAVE BEEN LEVIED IN THE PRESENT SITUATION. THAT THE APPELLANT CRAVES TO LEAVE TO ADD TO AND / OR TO ALTER, AMEND, RESCIND, MODIFY THE GROUNDS HEREIN ABOVE OR PRODUCE FURTHER DOCUMENTS BEFORE OR AT THE TIME OF HEARING OF THIS APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A SOCIETY REGISTERED UNDER THE KARNATAKA SOUHARDHA SAHAKARI ACT, 1997. THE MAIN OBJECT OF THE ASSESSEE-SOCIETY IS TO PROVIDE CREDIT FACILITIES TO ITS MEMBERS. FOR THE ASSESSMENT YEAR 2017-2018, THE ASSESSEE-SOCIETY FILED RETURN OF INCOME ON 31.10.2017 DECLARING TOTAL INCOME AT `NIL. THE ASSESSMENT WAS TAKEN UP FOR SCRUTINY AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE I.T.ACT, VIDE ORDER DATED 19.12.2019. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER ASSESSED THE INCOME AT RS.45,24,811 AFTER DISALLOWING THE DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT. THE SOLITARY REASON OR THE ASSESSING OFFICER TO DENY THE BENEFIT OF DEDUCTION U/S 80P(2)(A)(I) OF THE I.T.ACT WAS THAT THE ASSESSEE- SOCIETY WAS NOT REGISTERED UNDER THE CO-OPERATIVE SOCIETIES ACT BUT ONLY UNDER THE KARNATAKA SOUHARDHA SAHAKARI ACT, 1997. 4. AGGRIEVED BY THE DENIAL OF BENEFIT OF SECTION 80P(2)(A)(I) OF THE I.T.ACT, THE ASSESSEE PREFERRED AN APPEAL TO THE FIRST APPELLATE AUTHORITY. THE CIT(A) CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER. 5. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED ITA NO.360/BANG/2021. SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHKARI NIYAMITHA. 3 COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P OF THE I.T.ACT AND RELIED ON THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SWABHIMANI SOUHARDA CREDIT CO- OPERATIVE LIMITED V. GOVERNMENT OF INDIA REPORTED IN (2020) 421 ITR 670 (KAR.). 6. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE INCOME TAX AUTHORITIES. 7. I HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE REASON FOR THE ASSESSING OFFICER TO HOLD THAT THE ASSESSEE IS NOT ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80P OF THE I.T.ACT WAS THAT, THE ASSESSEE WAS ONLY REGISTERED UNDER THE KARNATAKA SOUHARDHA 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 COOPERATIVE 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. ITA NO.360/BANG/2021. SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHKARI NIYAMITHA. 4 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 COOPERATIVE SOCIETY UNDER THE ACT. SOUHARDAS ALSO OPERATE ON THE PRINCIPLE OF 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 ITA NO.360/BANG/2021. SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHKARI NIYAMITHA. 5 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 SELFHELP, MUTUAL AID, WHOLLY OWNED, MANAGED AND CONTROLLED BY MEMBERS AS ACCOUNTABLE, COMPETITIVE SELF-RELIANT AND ECONOMIC ENTERPRISES GUIDED BY 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 COOPERATIVES 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. IN THE INSTANT CASE, SINCE THE A.O. HAS DECIDED THE ISSUE AGAINST THE ASSESSEE SOLELY FOR THE REASON THAT THE ASSESSEE IS NOT A CO-OPERATIVE SOCIETY BECAUSE IT IS REGISTERED UNDER THE ITA NO.360/BANG/2021. SHRI MATHAJI VIVIDODDESHA SOUHARDA SAHKARI NIYAMITHA. 6 KARNATAKA SOUHARDHA SAHAKARI ACT, 1997, I AM OF THE VIEW THAT THE MATTER NEEDS TO BE EXAMINED AFRESH BY THE A.O. THE A.O. IS DIRECTED TO EXAMINE AFRESH THE CLAIM OF DEDUCTION U/S 80P OF THE I.T.ACT, IN LIGHT OF THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SWABHIMANI SOUHARDA CREDIT CO-OPERATIVE LTD. V. GOI (SUPRA). IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 20 TH DAY OF SEPTEMBER, 2021 . SD/- ( GEORGE GEORGE K ) JUDICIAL MEMBER BANGALORE; DATED : 20 TH SEPTEMBER, 2021. DEVADAS G* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(A)-NFC, DELHI 4. THE PR.CIT BANGALORE. 5. THE DR, ITAT, BENGALURU. 6. GUARD FILE. ASST.REGISTRAR/ITAT, BANGALORE