YAGNAVALKYA SOUHARDHA CREDIT CO-OPERATIVE LTD ,BANGALORE vs. INCOME TAX OFFICER WARD-3(2)(4), BANGALORE

This appeal is preferred by the assessee against the order of the Commissioner of Income-tax (Appeals) for the asst. year 2012- 13.

The grounds raised in this appeal is elaborate and argumentative nature, however, the issue involved in this appeal is with regard to denial of deduction claimed u/s 80P(2) of the Act.

The ld DR further contended that in the case of M/s Udaya Souharda Credit Co-operative Society Limited Vs. ITO in the Tribunal has restored the matter to the AO for verification of the impact of registration under Karnataka Souhardha Sahakari Act, 1977 as co-operative. Since in the instant case, the assessee is registered under Karnataka Souhardha Sahakari Act, 1977 as it appears to be by name, the matter is to be restored to the AO to ascertain the impact of registration under the registration of Souhardha Act as co-operative and also to decide as to whether the assessee is eligible for deduction u/s 80P of the Act?

The ld counsel for the assessee further disputed the submission and contended that this argument is raised first time in this case and the Revenue has never examined this aspect earlier. Therefore, revenue is refrained from taking this new stand.

Having carefully examined the orders of the authorities below in the light of the Tribunal order in the case of Udaya Souharda Credit Co-operative Society Limited (Supra), we find that though argument was not raised earlier but it goes to the root of the case as it is to be ascertained whether the assessee is entitled for 3 deduction u/s 80P and in the similar circumstance, the Tribunal has restored the matter back to the file of the AO in the case of Udaya Souharda Credit Co-operative Society Limited (Supra) in which the undersigned is the party. Relevant portion of that order is extracted hereunder for the sake of reference.

Presently we are concerned with the Karnataka and the Karnataka State has notified Karnataka Co- operative Societies Act, 1959 as well as the Karnataka Souharda Sahakari Act, 1997 and even at present both the Acts are in force simultaneously. Under the Karnataka Co-operative Societies Act, the Co-operative Societies are registered and under the Karnataka Souharda Sahakari Act, only Co-operatives are registered. The object of introducing the Karnataka Souharda Sahakari Act has been given in Act 17/2000, Amending Act 21/2004, Amending Act 16/2005, Amending Act 4/2013, Amending Act 34/2014, Amending Act 24/2016 and Amending Act 8/2017. Through various amendments, the scope of Souharda Sahakari Act was expanded but no where the co-operative societies are converted into the co-operatives. In both the Acts, co- operatives and co-operative societies are defined independently. In the Souharda Sahakari Act, the word co-operative and co-operative societies are defined in clause 2(c) and 2(g) which are extracted hereunder for the sake of reference:

Section 4 of Souharda Sahakari Act deal with the formation of co-operatives and its members and as per section 4(2) clause b, co-operative societies can be converted into co-operative by passing a resolution and once it is converted, the registration under the Societies Act shall be cancelled by the Registrar w.e.f. the date of certificate of registration given under Souharda Act. Relevant provisions of section 6 of Souharda Act is extracted hereunder for the sake of reference:

Similarly, if the co-operatives intend to convert into co-operative societies, conversion is also possible as per Amending Act 13/2004. In the co-operative societies Act, the word co-operative societies and the Co-operatives has also been defined under section 2(c) and 2 (d)(2), according to which co-operative society means a society registered or deemed to be registered under the co-operative societies Act and the co-operative means co-operative registered under the Karnataka Souharda Sahakari Act, 1997. Therefore, from careful reading of both the sections, it is abundantly clear that the co-operative and the co- operative societies are 2 different entities though their conversion from one to other is possible as per provisions of the respective Act.

We have also carefully examined the certificate of registration granted to the assessee and we find that assessee was registered as a co-operative under the name Udaya Souhardha Pattina Co-operative Limited and not as a co-operative society. Though the registration certificate was granted by Joint Registrar, Co-operative Societies, Bengaluru but it makes no difference as a Joint Registrar may be same for co-operative societies and co-operatives. For the sake of reference, we extract the certificate of registration granted as under:

We have also carefully perused the cause title in the assessment order and in the cause title of the assessment order, we find that assessment order was passed in the name of Udaya Souharda Credit Co- operative Society Ltd., whereas no certificate of registration was placed before us in the name of Udaya Souhardha Credit Co-operative Society ltd. Therefore, we are unable to understand how the assessee can claim it to be the co- operative society in the absence of proper registration under the Karnataka Co-operative Societies Act. Creation of Co-operative Society under the co- 8 operative societies Act is doubtful. Thus the claim of deduction under section 80P cannot be allowed. As per the provisions of section 80P of the Act, deduction can only be allowed to the co-operative societies registered under the co-operative societies Act. Without a proper registration under co-operative societies Act, nobody can claim it to be co-operative society as the activities of the co-operative societies are to be controlled under the co-operative societies Act through Registrar of the Co-operative Societies. Since all these new points have been raised during the course of hearing before us and according to us all these points goes to the root of the case, we are of the view that proper adjudication of the issues is required by the AO. We accordingly set aside the order of the CIT(A) and restore the matter to the AO to re-examine all these aspects by making necessary enquiry and investigation and also by passing a reasoned order in this regard. Since we have restored the matter to the AO, we find no justification to adjudicate the issue raised on merit. Accordingly, order of the CIT(A) is set aside and matter is restored to the AO for adjudication of the impugned issue in terms indicated above.”

Following the aforesaid order of the Tribunal, we set aside the order of the CIT(A) and restore the matter to the file of the AO to re-adjudicate the claim of the assessee in the light of aforesaid order of the Tribunal to ascertain as to whether the assessee is entitled for deduction u/s 80P or not before going on merit.

In the result, appeal of the assessees is allowed for statistical purposes.