SREE SEETHARAMA MANDIRAM,BANGALORE vs. INCOME TAX OFFICER, WARD- 5(2)(2), BANGALORE

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ITA 24/BANG/2020Status: DisposedITAT Bangalore27 April 2020AY 2016-176 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal held that societies registered under the Karnataka Souharda Sahakari Act are indeed cooperative societies as per the definition in Section 2(19) of the Income Tax Act. Therefore, the denial of deduction solely on this ground was incorrect.

What were the facts?

The assessee, a cooperative society registered under the Karnataka Souharda Sahakari Act, claimed deduction under Section 80P. The Assessing Officer disallowed the deduction, stating the assessee was not a cooperative society as defined by the Act. The CIT(A) confirmed this disallowance.

What were the issues?

Whether a society registered under the Karnataka Souharda Sahakari Act is a 'cooperative society' for the purpose of claiming deduction under Section 80P. Whether the denial of deduction based on the registration act is sustainable.

Which sections of the Income-tax Act were involved?

Section 80P,Section 2(19)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC-C” BENCH, BANGALORE

Before: Shri Chandra Poojari

Hearing: 24.02.2020

This appeal filed by the assessee is directed against 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 law, facts and circumstances of the case.

2. The order is passed in haste, without providing sufficient and reasonable opportunity of being heard.

3.

The order is passed against the principles of natural 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 Act.

6. The ld.AO erred in denying deduction u/s 80P on the premise that the Appellant has appointed Nominal Members and the CIT(A) erred in confirming the same.

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 & 234C of the Act.” 3. The facts of the case in brief are that the assessee itself has declared as a co-operative providing financial services and credit facilities to its members. For the assessment year 2016- 2017, the assessee has filed its return of income electronically 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 response to the notice u/s 143(2) dated 26.09.2017 and subsequent notices u/s 142(1), the assessee submitted the details / information called for through e-filing portal. During the course of scrutiny proceedings, it was brought to the notice of the assessee that in view of the amended provisions of sub- section (4) of section 80P of the Act, it was not eligible for deduction u/s 80P of the Act and therefore, the deduction claimed by the assessee to the extent of Rs.74,93,256 was proposed to be disallowed and brought to tax, by the Assessing Officer. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the CIT(A). The CIT(A) confirmed the view taken by the Assessing Officer. Hence, the assessee is in appeal before the Tribunal.

4.

After hearing both the parties and perusing the relevant

Sree Seetharama Mandiram. 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 2019, wherein the Tribunal vide its order dated 26.07.2019, remitted the matter to the files of the Assessing Officer for fresh consideration, by observing as under:-

“5. I have heard the rival submissions. The learned counsel for the Assessee submitted that Souharda Sahakari registered under the Karnataka Souharda Sahakari Act, 1997 are also co-operative societies within the meaning of Sec.2(19) of the Act and therefore the revenue authorities were not justified in denying the benefit of deduction to the Assessee. The learned DR relied on a decision of the ITAT Bangalore Bench in the case of M/s. Millennium Credit Co-operative Society Ltd. Vs. ITO & 2607/Bang/2017 in which the Tribunal followed the decision of ITAT Bangalore Bench in the case of M/s. Udaya Souharda Credit Co-operative Society Ltd. ITA No.2831/Bang/2017 order dated 17.8.2018 in which the issue whether souharda registered under the Karnataka Souharda Sahakari Act, 1997 can be regarded as co-operative society entitled to benefit of deduction 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 already considered this issue in the light of the Karnataka Souharda Sahakari Act, 1997 and therefore this issue has to be decided by me and cannot 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 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 co-operation and adopt the principles of co-operation.

Sree Seetharama Mandiram. 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 couldn’t 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 Page 5 of 7 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 Act–1997 (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 Sree Seetharama Mandiram. 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 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.”

5.

Both the parties fairly conceded that the issue under consideration is similar to that of the issue considered 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 Assessing Officer to adjudication afresh, on similar lines, after allowing a reasonable opportunity of being heard to the assessee.

6.

In the result, the appeal filed by the assessee is allowed for statistical purposes.

Sree Seetharama Mandiram. Order pronounced on this 27th day of April, 2020.

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