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Income Tax Appellate Tribunal, “C’’ BENCH : BANGALORE
Before: SHRI N.V VASUDEVAN, VICE PRESIDNET & SHRI B.R BASKARAN
Per B.R Baskaran, Accountant Member The appeal filed by the assessee is directed against the order passed by the ld dt. CIT(A), Gulbargha and it relates to asst. year 2016-17.
2. The solitary issue urged by the assessee relates to reduction of deduction claimed by the assessee u/s 80P of the Act.
3. The assessee is a Souharda Cooperative registered under Karnataka Souharda Sahakari Act 1997. It provides credit facilities to its members. In the return of income, the assessee claimed deduction u/s 80P of the Act. The AO took the view that the deduction u/s 80P is available only to cooperative societies and not to Souharda co-operative. According to AO, the cooperative and cooperative societies are two different entities. Since the assessee is a cooperative, the AO held that it is not entitled to deduction u/s 80P of the Act. Accordingly he rejected the claim of the assessee. The ld CIT(A) also took the view that the deduction u/s 80P shall be available only to cooperative society registered u/s Cooperative societies Act. Accordingly he confirmed the order passed by the ld CIT(A).
Before us the ld AR placed reliance on the decision dated 16/1/2020 passed by Hon’ble Karnataka High Court in the case of M/s Swambhimani Souhard Credit Cooperative Society Ltd., (Writ Petition No.48414/2018) and submitted that the Hon’ble High Court of Karnataka has held that the entity registered under Karnataka Souharda Sahakari Act, 1997 also fit into the definition of cooperative society as enacted in sec. 2(19) of the Income-tax Act. Accordingly the ld AR submitted that the order passed by tax authorities are liable to be set aside.
5. The ld DR, however, submitted that tax authorities have not examined the claim of the assessee in terms of provisions of sec. 80P of the Act. Accordingly he prayed that the matter may be set aside to the file of AO for examining the claim of AO in accordance with the provisions of sec. 80P of the Act.
We have heard the rival submissions and perused the record. The Hon’ble Karnataka High Court in the case of M/s Swambhimani Souhard Credit Cooperative Society Ltd., (Supra) has examined the issue of applicability of provision of sec. 80P of the Act to the cooperative registered under Karnataka Souhards Sahakari Act 1997 and has decided as under:-
“5. Having heard the learned counsel for the parties and having perused the petition papers, this Court is of a considered opinion that the answer to the above question needs to be in the affirmative for the, following reasons: (a) sec.80P of the 1961 Act provides for deduction in respect of income of Co-operative Societies is obvious going by its very text; sub- section (1) of said section reads 'as under:
80P. (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the stuns specified in sub-section (2) in computing the total income of the assessee.”
The other provisions of this section being not of much relevance to the c1uestion being treated, are not although they too have been looked into.
See. 2(19) which finds a place in the Clause of the 1961 Act reads as under; 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, The provisions of sec.80P are enacted by the Parliament for promoting the co-operative movement in the Country in tune with what Father of the Nation Mahatma Gandhi preached to the countrymen; this Section needs to be liberally construed to effectuate the legislative object of encouraging & promoting the growth of co-operative movement wide Kanga & Palkhivala's The Law and Practice of Income Tax. 101h Edition, LexixNexis at page 1656: it is more so because the right to form a co-operative society itself is made a Fundamental Right, now enshrining in Article 1901(1) by virtue of 97th Amendment to the Constitution of India w.e.f. 15.10.2013; (b) the object of enacting scc.SOP of the 196 1 Act may be defeated if a restrictive meaning is assigned to the definition of co-operative society’ as given u/s. 2(19) inasmuch as the invokeability; of the provisions of see. 80P is dependent Upon the entity seeking the benefit thereunder being a Co- operative society; going by the text and context of these provisions, one can safely conclude that all entities that are registered under the enactments relating to co-operative societies, regardless of their varying nomenclatures need to be treated as co- operative societies; this view accords with the purposive construction of sec.80P r/w sec.2(19) of the 1961 Act; (c) in the State of Karnataka, there have been two statutes enacted by the State Legislature that relate to registration & regulation of co-operative societies viz., the Karnataka Co-operative Societies Act, 1959 ie., Karnataka Act No. 17 of 1959 and the Karnataka Souharda Sahakari Act, 1997 i.e Karnataka Act No. 17 of 2000; both these Acts are enacted pursuant to Article 246(3) r/w Entry 32, List-11 of Schedule Vii of the Constitution of India; there is no other Entry to which this Act is relatable; the Legislative Entries- being only the fields of legislation need to be very broadly interpreted, is the settled position of constitutional jurisprudence wide UJAGAR PRINTS. ETC. vs. UNION OF INDIA, AIR 1989 SC 516; Chapter X of 197 Act containing sec.67 enacts important co- operative principles that animate and brood through almost all the provisions of this Act; (d) the Karnataka Souharda Sahakari Bill, 1997 has the following as the Statement of Objects & Reasons:
“1. the 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 specified therein:
removing all kinds of restrictions that have come to clog the free-functioning of the cooperatives and the controls and interference by the Government except registration and cancellation;
promotion of subsidiary organization, partnership between co-operatives and also collaboration between co-operatives and other institutions; 4. registration of co-operatives, union ca- operatives and Federal Co-operative in furtherance of the objectives specified above;
Conversion of co-operative societies registered under the Karnataka Co-operative Societies Act, 1959 as a co-operative under the proposed legislation. Hence the Bill"
(e) the preamble to the 1959 Act reads as under: "Whereas it is expedient (to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies) in the State of Karnataka Be it enacted by the Karnataka State Legislature in the Tenth 'ear of the Republic of India as follows-" Similarly, the preamble to the 1997 Act reads as follows: Whereas 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- ".
A perusal of these two preambles and various provisions of these two Acts leads one to an irresistible conclusion that both these Acts are cognate statutes that deal with cooperative societies, regardless of some difference in their nomenclature and functionality, the subject matter being the same; (e) the word 'co-operative' is defined by sec.2(d2) of 1959 Act asunder: "2('d-2): 'co-operative means a Co-operative registered under the Karnataka Sauharda Sahakari Act, 1997 (,Karnataka Act 17 of 2000), and includes the Union co-operative and the Federal Co-operative" Similarly, the word 'co-operative' is defined by Sec. 2(c) of 1997 Act as follows: co-operative means a co-operative including a co-operative bank doing the business of banking registered or deemed to be registered under Section 5 and which has the words 'Souharda Sahakari' in its name (and for the purposes of the Banking Regulation Act 1949 (Central Act JO of 1949), the Reserve Bank of India Act, 1934 (central Act 2 of 1934), the Deposit Insurance and Credit Guarantee Co7poration Act. 1961 (Central Act 47 of 1961) and the National Bank for Agriculture and Rural Development Act, 1981 (Central Act 67 of 1981), it shall be deemed to be a Co-operative Society A close examination of these two definitions shows that they have abundant proximity with each other in terms of content and contours; it hardly needs to be stated that in both these definitions the word 'co-operative' is employed not as an adjective but as a noun; the definition of other relative concepts in the dictionary clauses of these Acts strengthens this view; this apart, sec.7 of the 1997 Act provides that the entity registered as a 'co-operative' shall be a body corporate, notwithstanding the conspicuous absence of the word 'society' as a postfix; sec.9 of the 1959 Act makes the entity once registered u/s thereof a body corporate; both the entities have perpetual Succession by operation of law; thus on registration be it under the 1959 Act or the 1997 Act, a legal personality is donned by them, so that inter alia they can own and possess the property:
(f) the employment of the word 'Sahakari in the very title of the 1997 Act is also not sans any significance; ‘Sahakaar' in Sanskrit is the equivalent of sahakaara' in Kannada which means co-operation'; as already mentioned above both the 1959 Act and the 1997 Act employ this terminology; the 1997 Act is woven With the principles of co-operation; sec.4 of this Act bars registration of an entity unless its main objects are to serve the interest of the members in the area of co-operation and its bye-laws provide for economic and social betterment of its members through self- help & mutual aid in accordance with the cooperative principles; this apart. even sub-section (2) of scc.4 is heavily loaded with co-operative substance.
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 "co-operative 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.SOP of the said Act; a Writ of Certiorari issues quashing the impugned notice dated 30.03.2018at Annexure-D in W P No 48414/2018, other legal consequences accordingly.
It is needless to mention that the other provisions of sec. 80P of 1961 Act and their effect on the claim of the petitioner-1ikesocieties have been left to be addressed by the concerned authorities.”
Respectfully following the binding decision rendered by the Hon’’ble Jurisdictional High Court, we hold that the assessee is entitled for deduction u/s 80P of the Act. However as rightly pointed by ld DR there was no occasion for the AO to examine the claim of the assessee in terms of provisions of sec. 80P of the Act. Accordingly we set aside the order passed by the ld CIT(A) and restore the issue to the file of the AO for examining the same in accordance with the provisions of sec. 80P of the Act. The assessee should be provided adequate opportunity of being heard.
In the result, the appeal filed by the assessee is treated as allowed for statistical purposes.
Order pronounced in the open court on 4th February, 2020.