LOKMANYA MULTIPURPOSE CO-OPERATIVE SOCIETY LTD., vs THE COMMISSIONER OF INCOME TAX (APPEALS)

IN THE HIGH COURT OF KARNATAKA DHARWAD BENCH DATED THIS THE 21ST DAY OF NOVEMBER, 2017 PRESENT THE HON’BLE MRS.JUSTICE S.SUJATHA AND THE HON’BLE Dr. JUSTICE H. B. PRABHAKARA SASTRY I.T.A.No.100010/2015 BETWEEN: LOKMANYA MULTIPURPOSE CO-OPERATIVE SOCIETY LTD., PLOT NO.8, R.S.NO.21/2, KHANAPUR ROAD, TILAKWADI, BELGAUM, RPTD.BY ITS CEO, SHRI ABHIJEET S/O AVINASH DIXIT, AGE: ABOUT 40 YEARS, OCC: SERVICE, R/O. TILAKWADI, BELGAUM-590006.

… APPELLANT

(BY SRI.SANGRAM S.KULKARNI, ADV.)

A N D :

THE COMMISSIONER OF INCOME TAX (APPEALS), 3RD FLOOR, PHIROZ KHIMJI COMPLEX, OPP.CIVIL HOSPITAL, DR.AMBEDKAR ROAD, BELGAUM-590001.

THE INCOME TAX OFFICER WARD 2 (2), OPP.CIVIL HOSPITAL, DR.AMBEDKAR ROAD, BELGAUM-590001. …RESPONDENTS

(BY SRI.Y.V.RAVIRAJ, ADV. FOR R1 AND R2)

THIS APPEAL IS FILED UNDER SECTION 260-A OF THE INCOME TAX ACT PRAYING TO ALLOW THE APPEAL BY ANSWERING THE SUBSTANTIAL QUESTION OF LAW IN FAVOUR OF THE APPELLANT AND SET ASIDE THE ORDER DATED 26.09.2014, PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, PANAJI, IN ITA NO.02/PNJ/2014 AND ETC.,

THIS APPEAL COMING ON FOR HEARING, THIS DAY, S.SUJATHA J., DELIVERED THE FOLLOWING:

JUDGMENT

This appeal is filed by the assessee challenging the order passed by the Income Tax Appellate Tribunal, Panaji, (for short ‘ITAT’), in I.T.A.No.02/PNJ/2014, for the assessment year 2009-2010.

The assessee is a Multipurpose Co-operative Society registered under the Karnataka State Co-operative Societies Act. For the assessment year 2009-2010, the return filed by the assessee was processed under Section 143-(1) of the Income Tax Act, 1961 (for short ‘the Act’) and the case was selected for scrutiny and thereafter the assessment was concluded disallowing the deduction under Section 80P(2)(a)(i) of the Act. Being aggrieved, the assessee preferred an appeal before the Commissioner of

3 Income Tax (Appeals) which came to be rejected. Aggrieved by the same, an appeal was preferred before the ITAT. The ITAT dismissed the same. Hence, this appeal is preferred under Section 260-A of the Act, raising the following substantial questions of law. i) Whether the orders under challenge suffer from infirmities so far as denying exemption u/s 80P(2)(a)(i) of the IT Act, 1961? ii) Whether the Tribunal was justified in law in holding that the provisions of Section 80P(4) of the Income Tax Act, 1961 are applicable to the assessee society when the Assessee Society is a Multipurpose Co-operative Society and not a Primary Co-operative Bank on the facts and circumstances of the case? iii) Whether the orders under challenge suffer from infirmities in considering the fact that the Income Tax Act, 1961 does not define the word Co-operative Bank and it states that the Co-operative Bank

4 will have meaning as assigned in Banking Regulation Act, 1949? iv) Whether the appellant multipurpose Co- operative society falls within the definition of the Primary Agricultural Credit Co-operative Society under Section 2 (h-2) of the Karnataka Co-operative Societies Act, and is entitled to the benefit of deduction in respect of its income under Section 80P (2)(a)(i) of the Act regard being had to Section 80P(4) as per the dictum laid down by the Hon’ble High Court of Karnataka in ITA No.100042/2014 [Venugram Multi- purpose Co-operative Credit Society Ltd., vs. The Income Tax Officer, Ward 1 (2), Belgaum]?

Learned counsel Shri Sangram S. Kulkarni, appearing for the assessee submitted that in view of the dictum pronounced by the Hon’ble Apex Court in the case of THE CITIZEN CO-OPERATIVE SOCIETY LIMITED, THROUGH ITS MANAGING DIRECTOR, HYDERABAD in Civil Appeal No.10245/2017 (disposed of on 08.08.2017),

5 what is required to be noticed by the Assessing Officer for allowing the deduction under Section 80P(2)(a)(i), is firstly that the activities of the assessee is catering to two distinct categories of people namely resident/ordinary members or the nominal members. Secondly, whether the activities of the assessee comes within the ambit of co- operative society. These are the findings of fact which requires to be adjudicated by the Assessing Officer in terms of the judgment of the Hon’ble Apex Court. Thus, the learned counsel seeks for a remand to the Assessing Officer setting aside the orders impugned herein.

Learned counsel Shri Y.V.Raviraj, appearing for the revenue do not dispute the same. Learned counsel has no objections to remand the matter to the Assessing Officer to redo the assessment in the light of the judgment of the Hon’ble Apex Court in the case of CITIZEN CO-OPERATIVE SOCIETY’s case supra.

6 5. In view of the aforesaid, without answering the questions of law raised, the impugned orders are set aside and the matter is remanded to the Assessing Officer to redo the assessment in terms of the law enunciated by the Hon’ble Apex Court in the case of Citizen Co-operative Society’s case supra, as expeditiously as possible. Appeal stands disposed of accordingly.

(Sd/-) JUDGE

Jm/-

LOKMANYA MULTIPURPOSE CO-OPERATIVE SOCIETY LTD., vs. THE COMMISSIONER OF INCOME TAX (APPEALS)