2021 (9) TMI 898 - AT - Income Tax

Tribunal grants appellant deduction eligibility under Income Tax Act, rules in favor of cooperative societies.

Shri Mathaji Vividoddesha Souharda Sahakari Niyamitha Versus The Income Tax Officer Ward 2 (2) (1) Bangalore.

The Tribunal allowed the appellant's appeal, ruling in favor of the appellant's eligibility for deduction under section 80P of the Income Tax Act. It held ... Deduction u/s 80P - definition of “co-operative society” as enacted by sec. 2(19) - deduction denied assessee was only registered under the Karnataka Souhardha Sahakari Act, 1997, and therefore, was not a co-operative society within the purview of section 2(19) - HELD THAT:- Hon’ble Karnataka High Court in the case of M/s.Swabhimani Souharda Credit Co-operative Ltd. [2020 (1) TMI 831 - KARNATAKA HIGH COURT] had decided an identical issue and held that the entities registered under the Karnataka Souharda Sahakari Act, 1997, fit into the definite term “Cooperative Society” - also see SIDDARTHA PATTINA SOUHARDA SAHAKARI NIYAMITHA [2019 (7) TMI 1390 - ITAT BANGALORE]. In the instant case, since the A.O. has decided the issue against the assessee solely for the reason that the assessee is not a Co-operative Society because it is registered under the Karnataka Souhardha Sahakari Act, 1997, thus matter needs to be examined afresh by the A.O. The A.O. is directed to examine afresh the claim of deduction u/s 80P - Appeal filed by the assessee is allowed for statistical purposes. Issues:- Eligibility for deduction under section 80P of the Income Tax Act.- Interpretation of the term 'Co-operative Society' under section 2(19) of the Income Tax Act.- Applicability of deduction under section 80P(2)(a)(i) of the Income Tax Act.- Assessment of income and levying of interest under sections 234B and 234C of the Income Tax Act.Eligibility for Deduction under Section 80P:The appellant, a society registered under the Karnataka Souhardha Sahakari Act, 1997, filed an appeal against the denial of deduction under section 80P(2)(a)(i) of the Income Tax Act by the Assessing Officer and the CIT(A). The Assessing Officer's basis for denial was that the appellant was not registered under the Co-operative Societies Act but under the Karnataka Souhardha Sahakari Act, 1997. The appellant contended that entities registered under the Karnataka Souhardha Sahakari Act, 1997, fall under the definition of 'Cooperative Society' as per section 2(19) of the Income Tax Act, citing relevant judicial precedents. The Tribunal agreed with the appellant's argument, holding that the appellant should be allowed deduction under section 80P(2)(a)(i) as the denial was based on an incorrect ground. The matter was remanded to the Assessing Officer for further examination.Interpretation of 'Co-operative Society' under Section 2(19):The Tribunal referenced the definition of 'Co-operative Society' under the Income Tax Act, which includes societies registered under any law for the registration of co-operative societies in any State. It highlighted the principles of cooperation underlying cooperative societies and emphasized that entities registered under the Karnataka Souhardha Sahakari Act, 1997, are also considered cooperative societies. The Tribunal supported its interpretation by citing the legislative history and the functional autonomy granted to Souharda Cooperatives in Karnataka, indicating their alignment with cooperative principles.Applicability of Deduction under Section 80P(2)(a)(i):The Tribunal's decision was influenced by the judicial pronouncements in the case of Swabhimani Souharda Credit Cooperative Limited and the Tribunal's own ruling in Siddartha Pattina Souharda Sahakari Niyamitha. These cases established that entities registered under the Karnataka Souhardha Sahakari Act, 1997, are eligible for deduction under section 80P of the Income Tax Act, as they qualify as cooperative societies. The Tribunal directed the Assessing Officer to reevaluate the appellant's claim for deduction under section 80P in light of these precedents.Assessment of Income and Levying of Interest:The Tribunal also addressed the issue of levying interest under sections 234B and 234C of the Income Tax Act, which the Assessing Officer had imposed. The Tribunal did not find justification for the imposition of interest under these sections in the present situation, indicating that the interest levied was inappropriate. The Tribunal's decision to allow the appeal for statistical purposes encompassed the assessment of income and the interest levied, providing relief to the appellant on these grounds.In conclusion, the Tribunal's judgment primarily focused on the eligibility of the appellant for deduction under section 80P of the Income Tax Act, emphasizing the inclusion of entities registered under the Karnataka Souhardha Sahakari Act, 1997, within the definition of 'Co-operative Society.' The Tribunal's detailed analysis, supported by relevant legal precedents and legislative history, underscored the appellant's entitlement to the deduction and necessitated a fresh examination by the Assessing Officer.