SHRI BASAVESHWAR PATTIN SOUHARD SAHAKARI NIYAMIT,GHATAPRABHA vs. INCOME TAX OFFICER, WARD - 1, GOKAK

This appeal by the assessee against the order dated 16-12-2019 passed by the Commissioner of Income Tax (Appeals), Belagavi [‘CIT(A)’] for assessment year 2016-17.

The only issue is to be decided is as to whether the CIT(A) is justified in confirming the order of AO in denying deduction u/s. 80P(2) of the Act ex-parte of the assessee.

Heard both the parties and perused the material available on record. I note that the assessee is a Souhard Co-operative Society registered under the Karnataka Souhard Sahakari Act, 1997. The assessee is engaged in providing credit facilities to its members and declared the total income of Rs. Nil after claiming deduction u/s. 80P(2)(a)(i) of the Act amounting to Rs.45,38,850/-. The AO was of the opinion that the assessee has registered under the Karnataka Souharda Act, 1997 as a Co-operative, hence, it is not a Co-operative Society. By holding so, the AO denied deduction u/s. 80P(2) of the Act. The CIT(A) held that the Co-operative and Co-operative Society are two different entities though their conversion from one to other is possible as per provisions of the respective Act. Further, he confirmed the order of AO in denying the deduction u/s. 80P(2)(a)(i) of the Act in the absence of registration under the Karnataka Co-operative Societies Act, 1959. The ld. AR, Shri Sateesh Nadagouda placed on record the decision of Hon’ble High Court of Karnataka in the case of M/s. Swabhimani Souharda Credit Co-operative Ltd. in Writ Petition No. 48414 of 2018 and Writ Petition No. 14381 of 2019. On careful reading of the said decision rendered by the Hon’ble High Court of Karanataka, I note that the Hon’ble High Court was pleased to hold in page 11 of the said decision that the entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of Co-operative Society as enacted in section 2(19) of the Act, which further held that the petitioners therein are entitled to stake their claim for the benefit of section 80P of the Act. Admittedly, the contention of the assessee during the course of assessment proceedings though it is registered under Karnataka Souharda Sahakari Act it is a Co-operative Society entitling to deduction u/s. 80P(2) of the Act, but however, the AO and CIT(A) did not consider the same and held the Co-operative and Co-operative Society are different in nature. On careful reading of the decision of Hon’ble High Court of Karnataka it is clear that the entities registered under Karnataka Souharda Sahakari Act, 1997 are fit into the definition of Co-operative Society as contemplated u/s. 2(19) of the Act. Admittedly, the decision of Hon’ble High Court of Karnataka was not before the CIT(A) while adjudication of the claim of the assessee u/s. 80P of the Act. Therefore, I find force in the arguments of ld. AR to remand the matter to the file of CIT(A) for its fresh consideration to decide the claim of the assessee in terms of decision of Hon’ble High Court of Karnataka in the case of M/s. Swabhimani Souharda Credit Co-operative Ltd. (supra). The ld. DR did not report objection in remanding the matter to the file of CIT(A). Therefore, taking into consideration the facts and circumstances of the case and the submissions of ld. AR and DR and in the interest of justice, I deem it proper to remand the matter to the file of CIT(A) for its fresh adjudication to decide the issue in terms of ratio laid down by the Hon’ble High Court of Karnataka in the case of M/s. Swabhimani Souharda Credit Co-operative Ltd. (supra). The assessee is liberty to file evidences, if any, in support of its claim. Thus, the ground raised by the assessee is allowed for statistical purpose.

In the result, the appeal of assessee is allowed for statistical purpose.