2017 (11) TMI 1624 - HC - Income Tax

High Court overturns denial of tax exemption to Co-op Society under Section 80P(2)(a)(i)

LOKMANYA MULTIPURPOSE CO-OPERATIVE SOCIETY LTD Versus THE COMMISSIONER OF INCOME TAX (APPEALS), BELGAUM AND THE INCOME TAX OFFICER WARD 2 (2) BELGAUM

The High Court set aside the orders denying the Multipurpose Co-operative Society's exemption under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The ... Denying exemption u/s 80P(2)(a)(i) - eligibility criteria - Held that:- 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 in the case of Citizen Co-operative Society’s case [2017 (8) TMI 536 - SUPREME COURT] wherein pronounced 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. - Decided in favour of assessee for statistical purposes. Issues:1. Denial of exemption under Section 80P(2)(a)(i) of the Income Tax Act, 1961.2. Applicability of Section 80P(4) to a Multipurpose Co-operative Society.3. Interpretation of the term 'Co-operative Bank' under the Income Tax Act, 1961.4. Eligibility of a Multipurpose Co-operative Society for deduction under Section 80P(2)(a)(i) based on Karnataka Co-operative Societies Act.Analysis:Issue 1: Denial of exemption under Section 80P(2)(a)(i)The appellant, a Multipurpose Co-operative Society, challenged the order of the Income Tax Appellate Tribunal (ITAT) denying the deduction under Section 80P(2)(a)(i) for the assessment year 2009-2010. The Commissioner of Income Tax (Appeals) also rejected the appeal. The ITAT upheld the decision, leading to the current appeal. The appellant raised questions regarding the infirmities in denying the exemption. The counsel for the appellant argued that the Assessing Officer must consider whether the activities cater to distinct categories of members and fall within the ambit of a co-operative society. The counsel sought a remand to the Assessing Officer for reassessment based on the judgment of the Hon'ble Apex Court in a relevant case.Issue 2: Applicability of Section 80P(4) to a Multipurpose Co-operative SocietyA key question raised was whether the provisions of Section 80P(4) of the Income Tax Act, 1961 applied to the appellant society, which is a Multipurpose Co-operative Society and not a Primary Co-operative Bank. The appellant contested the Tribunal's decision on this matter, emphasizing the distinction between the types of co-operative societies under the Act. The issue revolved around the correct interpretation and application of the relevant provisions to the appellant's status.Issue 3: Interpretation of the term 'Co-operative Bank'The appellant questioned the infirmities in considering the definition of 'Co-operative Bank' under the Income Tax Act, 1961, which refers to the meaning assigned in the Banking Regulation Act, 1949. The lack of a specific definition of 'Co-operative Bank' in the Income Tax Act raised concerns regarding the application of Section 80P(2)(a)(i) to the appellant society, a Multipurpose Co-operative Society.Issue 4: Eligibility for deduction under Section 80P(2)(a)(i) based on Karnataka Co-operative Societies ActThe appellant sought clarification on whether the Multipurpose Co-operative Society falls within the definition of a Primary Agricultural Credit Co-operative Society under the Karnataka Co-operative Societies Act and is entitled to the deduction under Section 80P(2)(a)(i). Reference was made to a previous judgment of the Hon'ble High Court of Karnataka for guidance on the matter. The eligibility of the appellant for the deduction hinged on meeting the criteria specified in the relevant legal provisions.In conclusion, the High Court set aside the impugned orders and remanded the matter to the Assessing Officer for reassessment in line with the judgment of the Hon'ble Apex Court. The appeal was disposed of accordingly, without directly addressing the questions of law raised by the appellant.