2019 (11) TMI 1832 - AT - Income Tax

Cooperative society entitled to section 80P deduction despite registration under Karnataka Souharda Sahakari Act 1997

M/s. Mahalakshmi Souharda Credit Co Operative Ltd. Versus The Income Tax Officer, Ward-6 (2) (2), Bangalore

M/s. Mahalakshmi Souharda Credit Co Operative Ltd. Versus The Income Tax Officer, Ward-6 (2) (2), Bangalore - TMI Issues Involved:1. Rejection of the deduction claimed under section 80(P)(2)(a)(i) of the Income Tax Act.2. Classification of the assessee as a cooperative society under section 2(19) of the Income Tax Act.3. Applicability of previous tribunal decisions on the current case.4. Examination of other conditions for the allowability of deduction under section 80P.Detailed Analysis:1. Rejection of the deduction claimed under section 80(P)(2)(a)(i):The assessee objected to the orders of the CIT (A) for the assessment years 2012-13 and 2016-17, which denied the deduction claimed under section 80(P)(2)(a)(i) of the Income Tax Act. The CIT (A) based their decision on a previous tribunal order in the case of Udaya Souharda Credit Co Operative Society Ltd. vs. ITO, stating that the assessee is a cooperative and not a cooperative society, making the deduction under section 80P inadmissible.2. Classification of the assessee as a cooperative society under section 2(19):The assessee argued that their business consists entirely of extending credit facilities to its members, which falls under section 80(P)(2)(a)(i). They also contended that cooperative societies defined under section 2(19) include societies registered under the 'Karnataka Souharda Sahakari Act, 1997.' The assessee cited decisions from the Honourable Jurisdictional High Court and the ITAT in their favor.3. Applicability of previous tribunal decisions:The learned AR of the assessee referred to a subsequent tribunal order in the case of Siddartha Pattina Souharda Sahakari Niyamitha vs. ITO, which considered the earlier tribunal order and concluded that Souharda Cooperatives are a form of cooperative society registered under Karnataka law. Therefore, the denial of deduction under section 80P on this ground was incorrect. The AR requested that the issue be decided in favor of the assessee and the matter be remanded to the AO for further examination of other conditions under section 80P.The learned DR of the revenue argued that the earlier tribunal order by the Division Bench should be preferred over the later order by the SMC Bench, as the latter did not adequately discuss the applicability of the former.4. Examination of other conditions for the allowability of deduction under section 80P:The tribunal considered the rival submissions and noted that the SMC Bench had duly considered the earlier Division Bench order and provided reasons for deciding the issue at the tribunal level instead of remanding it to the AO. The tribunal held that the CIT (A) was not justified in denying the deduction under section 80P solely because the assessee was registered under the Karnataka Souharda Sahakari Act, 1997. The tribunal set aside the CIT (A)'s order and remanded the issue to the AO to examine whether the assessee satisfies other conditions of section 80P, directing the AO to pass a necessary order as per law after providing adequate opportunity of being heard to the assessee.Conclusion:The tribunal allowed both appeals of the assessee, setting aside the CIT (A)'s orders and remanding the issue to the AO for further examination of the allowability of deduction under section 80P, considering other conditions of the section. The tribunal emphasized the binding nature of the SMC Bench's order and provided detailed reasoning for its decision.