SHRI.BASAVESWAR URBAN CREDIT SOUHARDA vs. THE INCOME TAX OFFICER

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WP/109218/2019HC KarnatakaKAHC02001571201927 January 2020Bench: S G PANDIT6 pages
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What did the High Court hold?

The High Court of Karnataka, Dharwad Bench, disposed of the writ petition in terms of an earlier order passed by the Principal Bench of the High Court of Karnataka, Bengaluru, in identical writ petitions (WP No.48414/2018 and connected matters). The Principal Bench had declared that entities registered under the Karnataka Souharda Sahakari Act, 1997, fit the definition of 'co-operative society' under Section 2(19) of the Income Tax Act, 1961. Consequently, such entities are entitled to claim the benefit of Section 80P of the Income Tax Act, 1961, subject to all just exceptions. The court quashed the impugned notice and directed the respondent Income Tax Officer to pass an assessment order treating the petitioner as a co-operative society and extending the benefit under Section 80P, with other exceptions as observed in the prior order. The ratio decidendi is that the definition of 'co-operative society' in the Income Tax Act is broad enough to encompass societies registered under state-specific co-operative acts like the Karnataka Souharda Sahakari Act, 1997, for the purpose of deductions under Section 80P.

What were the facts?

The petitioner, Shri.Basaveswar Urban Credit Souharda Sahakari Niyamita, registered under the Karnataka Souharda Sahakari Act, 1997, filed a writ petition seeking a declaration that the term 'co-operative' in Section 2(19) of the Income Tax Act, 1961, applies to entities registered under the 1997 Act. The petitioner also sought to quash an Income Tax Officer's notice dated December 7, 2018, and assessment proceedings under Section 143(3) for Assessment Year 2017-18. The core of the petitioner's request was to be treated as a co-operative society on par with those registered under the Karnataka Co-operative Societies Act, 1959, and to receive the benefit of Section 80P of the Income Tax Act, 1961. The respondents included various income tax authorities and government departments.

What were the issues?

1. Whether an entity registered under the Karnataka Souharda Sahakari Act, 1997, fits into the definition of 'co-operative society' as enacted by Section 2(19) of the Income Tax Act, 1961, for the purpose of Section 80P thereof. (Question of law and mixed fact and law, turning on Section 2(19) and Section 80P of the Income Tax Act, 1961, and Section 2(e) of the Karnataka Souharda Sahakari Act, 1997). Assessee's contention: The petitioner argued that the word 'co-operative' in Section 2(19) of the IT Act should be interpreted harmoniously to include societies registered under the Karnataka Souharda Sahakari Act, 1997, thereby entitling them to the benefits of Section 80P. Revenue's contention: The judgment does not record specific arguments from the revenue side on this issue. However, the impugned notice and assessment proceedings suggest the revenue's stance was that the petitioner was not a 'co-operative society' for the purposes of Section 80P.

Which sections of the Income-tax Act were involved?

Section 2(19),Section 80P,Section 143(3)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 27TH DAY OF JANUARY, 2020 BEFORE

THE HON’BLE MR.JUSTICE S.G. PANDIT

WRIT PETITION NO.109218/2019 (T-IT)

BETWEEN

SHRI.BASAVESWAR URBAN CREDIT SOUHARDA SAHAKARI NIYAMITH, BENIWAD, TQ: HUKKERI, DIST: BELAGAVI, REP. BY ITS CHIEF EXECUTIVE OFFICER, (CEO), SRI.BASAVARAJ S/O MARUTHI BADAMALLANAVAR, AGED ABOUT: 38 YEARS. ... PETITIONER

(BY SRI.H.R.KAMBIYAVAR, ADVOCATE FOR SMT.PATRI SHASHIKALA KALLAYYA, ADVOCATE)

AND

1.

THE INCOME TAX OFFICER WARD 1, GOKAK DR.BHODAGERIS HOSPITAL BUILDING, BELAGAVI ROAD, GOKAK-591307.

2.

COMMISSIONER OF INCOME TAX, GOKAK, DR.GHODIGERI’S HOSPITAL BUILDING, BELAGAVI ROAD, GOKAK 591307.

3.

CENTRAL BOARD OF DIRECT TAXES, NORTH BLOCK, NEW DELHI 110 001 REP. BY ITS CHAIRPERSON.

4.

MINISTRY OF FINANCE, REVENUE DEPARTMENT,

2 NORTH BLOCK, NEW DELHI 110 001 REP. BY ITS UNDER SECRETARY.

5.

GOVERNMENT OF KARNATAKA, CO-OPERATION DEPARTMENT, KARNATAKA GOVERNMENT SECRETARIAT ROOM NO.610, 3RD GATE, 6TH FLOOR, M.S.BUILDING, DR.AMBEDKAR VEEDHI, BANGALORE 560 001 REP. BY ITS SECRETARY.

6.

REGISTRAR OF CO-OPERATIVE SOCIETIES, NO.1, ALI ASKER ROAD, NEAR RAJ BHAVAN, VASANTH NAGAR, BENGALURU 560052 REP. BY ITS REGISTRAR. ... RESPONDENTS

(BY SRI.Y V RAVIRAJ, ADVOCATE FOR R1-R4, SMT.VEENA HEGDE, AGA FOR R5 AND R6)

THIS WRIT PETITION IS FILED UNDER ARTICLES 226 AND 227 OF THE CONSTITUTION OF INDIA PRAYING TO DECLARE THAT THE WORD ‘CO- OPERATIVE’ IN SECTION 2(19) OF THE IT ACT APPLIES TO ALL IDENTITIES REGISTERED UNDER THE STATE LAW INCLUDE A CO-OPERATIVE AS DEFINED UNDER SECTION 2(E) OF THE KARNATAKA SOUHARDA SAHAKARI ACT, 1997 BY HARMONIOUS CONSTRUCTION OF BOTH THE ENACTMENTS AND ETC.

THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING B GROUP THIS DAY, THE COURT MADE THE FOLLOWING:

3 ORDER The petitioner-Credit Souharda Sahakari Niyamita registered under the Karnataka Souharda Sahakari Act, 1997 (for short, ‘1997, Act’) is before this Court under Article 226 of the Constitution to declare that the word “Co-operative” in Section 2(19) of the Income Tax Act, 1961 (for short, ‘1961, Act’) applies to all co-operatives including the word “co-operative” defined under Section 2(e) of the 1997 Act and consequently prayer to quash the impugned notice bearing No.F.No.ITO/W- 1/142(1)/GKK/AACAS1491C/2018-19/132, dated 7.12.2018 vide Annexure-E as well as to quash assessment proceedings under Section 143(3) for the A.Y. 2017-18 bearing F.No. Sri. Basaveshwar Souharda/ITO/2018-19, dated 17.1.2019 vide Annexure-G. In other words, the petitioner is seeking for prayer to treat it as Co-operative on par with Co- operative registered under the Karnataka Co-operative

4 Societies Act, 1959 and to extend the benefit of Section 80P of the 1961 Act.

2.

Identical issue had come-up before the Principal Bench, High Court of Karnataka, Bengaluru in WP No.48414/2018 and connected writ petition, wherein the Court had framed following issue for its consideration: “Whether an entity registered under the Karnataka Souharda Sahakari Act, 1997 fits into the definition of “co-operative society” as enacted by Section 2(19) of the Income Tax Act, 1961 for the purpose of Section 80P thereof.

3.

After referring to Section 80P of the 1961 Act, the provisions of 1997 Act and Karnataka Co- operative Societies Act, 1959, (for short, ‘1959 Act’) the Principal Bench in the above said writ petitions has held as follows: “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

5 fit into the definition of “co-operative society” as enacted in Section 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 Section 80P of the said Act; a Writ of Certiorari issues quashing the impugned notice dated 30.3.2018 at Annexure-D in WP No.48414/2018; other legal consequences accordingly do follow. It is needless to mention that the other provisions of Section 80P of 1961 Act and their effect on the claim of the petitioner-like- societies have been left to be addressed by the concerned authorities.”

4.

The question involved in the present writ petition is also to the effect that whether the petitioner- Society registered under the 1997 Act is to be treated on par with Co-operative Societies registered under the 1959 Act and whether petitioner would be entitled for the benefit of Section 80P of the 1961 Act. The question is answered by the Principal Bench in the above writ petitions. Hence, in terms of the order dated 16.1.2020

6 in WP No.48414/2018 and connected writ petition, the present writ petition is disposed of. The respondent is directed to pass assessment order treating the petitioner as Co-operative Society and extending the benefit under Section 80P of the 1961 Act, with all other exceptions as observed in order dated 16.1.2020 in WP No.48414/2018.

Sd/- JUDGE JTR

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