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Income Tax Appellate Tribunal, “SMC-B” BENCH, BANGALORE
Before: Shri Chandra Poojari
This appeal filed by the assessee is directed against 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 Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant’s case.
The appellant denies itself liable to be assessed total income of Rs.41,77,576/- as against returned income of Rs.4,43,300/- on the facts and circumstances of the case.
The learned CIT(A) was not justified in law in confirming the disallowance of Rs.37,34,296/- under the provision of section 80P(2)(a)(i) of the Act on the facts and circumstances of the case.
Sri Siddhi Souharda Sahakari Niyamitha. 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 appreciation of the constitution of the appellant and that there were no provision for registration as a “Co-operative” as assumed by the authorities below, on the facts and circumstances of 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 different Co- operative Acts in the state to be co-operative societies, 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 have 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 the definition of section 2(19) of the Act, to hold that only assessee’s registered under the Co-operative Societies Act, 1959, were eligible to claim deduction under section 80P of the Act, which is contrary to the intent of the definition, on the facts and circumstances of the case.
8. The learned CIT(A) was not justified in confirming the action of the A.O. in assessing the appellant in the status of the AOP, when the appellant has filed the return under the status of co-operative society and no notice has been issued to assess the appellant under the status of AOP and hence the order passed was bad in law, on the facts and circumstances of the case.
9. The learned CIT(A) was not justified in law and on facts in not following a binding decision of the jurisdictional Tribunal, which was rendered subsequent to the decision relied upon by the CIT(A), without appreciating the reasoning arrived at in the decision, on the facts and circumstances of the case.
10. The findings of the learned Commissioner of Income-tax (Appeals) in the order passed are not in accordance with the law and consequently the order is required to be quashed on the facts and circumstances of the case.
11. The appellant denies the liability to pay interest under section 234B and 234C of the Act, in view of the fact that there
Sri Siddhi Souharda Sahakari Niyamitha. 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 accordance with the law and are not discernible from the order and hence deserves to be cancelled on the facts and circumstances of the case. 12. The appellant craves leave of this Hon’ble Tribunal, to add, alter, delete, amend or substitute any or all the above grounds of appeal as may be necessary at the time of hearing.
13. For these and other grounds that may be urged at the time of hearing of appeal, the appellant prays that the appeal may be allowed for the advancement of substantial cause of justice and equity.”
3. The facts of the case in brief are that the assessee is co- operative registered under the Karnataka Souharda Sahakari Act, 1997. It is engaged in providing financial services to its members. For the assessment year 2016-2017, the assessee has filed its return of income on 04.08.2016 electronically declaring a total income of Rs.4,43,300, after claiming deduction 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 CASS and statutory notices were issued to the assessee. During the assessment proceedings, the assessee furnished a letter issued by the Registrar of Co-operative Societies, Karnataka State, Bengaluru dated 11.10.2018 addressed to the Managing Director, Karnataka State Souharda Federal Co-operative limited, Bengaluru, clarifying that Souharda Co-operatives could be regarded as co-operative societies. However, after considering the facts of the case and the submissions 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 assessee was Sri Siddhi Souharda Sahakari Niyamitha. 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 CIT(A). The CIT(A) confirmed the view taken by the Assessing Officer. Hence, the assessee is in appeal before the Tribunal.
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 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.
Sri Siddhi Souharda Sahakari Niyamitha. 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;”
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. Cooperative Societies and Co-operatives are all founded on the principle of cooperation.
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.
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’ Sri Siddhi Souharda Sahakari Niyamitha. 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 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:- ”
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.
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.
In the result, appeal by the Assessee is allowed for statistical purposes.”
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 Sri Siddhi Souharda Sahakari Niyamitha. 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.
In the result, the appeal filed by the assessee is allowed for statistical purposes.
Order pronounced on this 27th day of April, 2020.