Nagalambika Pattina Souharda Sahakari Niyamita Vs ITO (ITAT Bangalore)
ITAT Bangalore held that deduction under section 80P of the Income Tax Act is duly available to the entities registered under Karnataka Souharda Sahakari Act, 1997.
Facts- Assessee is a Cooperative Society registered under Karnataka Souharda Sahakari Act, 1997. It is involved in the business of providing credit facilities to its members in form of loans for business, housing etc. It also collects funds from its members.
AO noted that as per the Certificate filed by the assessee, it is registered under Karnataka Souharda Sahakari Act, 1997 on 01.10.2014 as a “Cooperative” and is not registered under Karnataka Cooperative Societies Act, 1959 as a “Cooperative Society”. AO held that the assessee is a ‘Cooperative’ and not a “Cooperative Society”. AO held that deductions u/s 80P of the Act are allowed only to Cooperative Societies registered under Karnataka Cooperative Societies Act and not to a Cooperative registered under Karnataka Souharda Sahakari Act.
Hence, deduction claimed u/s 80P of the Act was disallowed and Net profit of Rs.35,37,272/- was taxed as Income in status of AOP. On appeal, the Ld. CIT(A) confirmed the order of AO. Against this assessee has preferred the present appeal.
Conclusion- The issue of deduction u/s 80P is squarely covered by the order of the coordinate bench of the Tribunal in the case of M/s. Pavagada Souharda Multi-Purpose Co-operative Ltd. in ITA No.648/Bang/2020 for the assessment year 2016-17 dated 16.9.2021, wherein it was held the entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of “co-operative society” as enacted in sec.2(19) of the Income Tax Act, 1961 and therefore subject to all just exceptions, petitioners are entitled to stake their claim for the benefit of sec.80P of the said Act.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
This appeal by assessee is directed against order of CIT(A), NFAC, Delhi dated 11.8.2022 for the assessment year 2017-18. The assessee has raised following grounds of appeal:-
1. The order of AO is bad in law and against the decision of higher appellate authority
2. The order of the Hon’ble CIT(A)- NFAC, Delhi is against the Act and jurisdictional High Court decision in the case of M/s Swabhimani Souharda Credit Cooperative Ltd WP No 48414/2018 wherein is promulgated that cooperative registered under Souhard Act is also eligible for exemption u/s 80P of the Income Tax Act, 1961.
3. The order of Hon’ble CIT(A)- NFAC, Delhi is bad in law and without considering the facts of the case relating to the addition sustained on account of provisions of section 194A of the Act.
4. Appellant craves leaves to add, to alter, to amend and to delete any other grounds at the time of hearing.”
2. The first issue for our consideration is with regard to ground 2, which reads as follows:-
2. “The order of the Hon’ble CIT(A)- NFAC, Delhi is against the Act and jurisdictional High Court decision in the case of M/s Swabhimani Souharda Credit Cooperative Ltd WP No 48414/2018 wherein is promulgated that cooperative registered under Souhard Act is also eligible for exemption u/s 80P of the Income Tax Act, 1961.”
3. Facts of the case are that the assessee filed its ITR for AY. 2017-18 on 29.03.2018 showing total income of Rs.NIL after claiming deduction u/s 80P of the Income-tax Act, 1961 [‘the Act’ for short] of Rs.35,41,970/-. Assessee is a Cooperative Society registered under Karnataka Souharda Sahakari Act, 1997. It is involved in business of providing credit facilities to its members in form of loans for business, housing etc. It also collects funds from its members. The ld. AO noted that as per Certificate filed by assessee, it is registered under Karnataka Souharda Sahakari Act, 1997 on 0 1.10.2014 as a “Cooperative” and is not registered under Karnataka Cooperative Societies Act, 1959 as a “Cooperative Society”. The ld. AO held that assessee is a ‘Cooperative’ and not a “Cooperative Society”. The AO has discussed provisions of Section 80P in para 3.1 of his order and held deductions u/s 80P of the Act are in respect of Income of Cooperative Society. The definition contained in Section 2(19) is of ‘Cooperative Society’ and not a ‘Cooperative”. The AO held that deductions u/s 80P of the Act are allowed only to Cooperative Societies registered under Karnataka Cooperative Societies Act and not to a Cooperative registered under Karnataka Souharda Sahakari Act. The AO noted that both Act are in force simultaneously. Under Karnataka Cooperatives Act, 1959 the “Cooperative Societies” are registered and under the Karnataka Souharda Sahakari Act, 1997 a ‘Cooperative is registered. Vide amendments in Karnataka Souharda Sahakari Act the scope of Act was expanded but nowhere were Cooperative Societies converted to Cooperatives. In both the Acts the definition of Cooperative and Cooperative Society is independently given. Conversion from Cooperative to Cooperative Society is possible as per Amending Act, 13/2004. Both are independent entities though their conversion from one to another is possible. No person can claim to be a Cooperative Society without registration under Karnataka Cooperative Societies Act and same are controlled through a Registrar Cooperatives. Thus, these two are Independent entities. The AO held that as per the certificate of Registration produced by the Appellant it is Cooperative and not a Cooperative Society. In view of these facts, the ld. AO held that assessee does not fall in the definition of a ‘Cooperative Society’ u/s 2(19) of the Act and is not eligible for deduction u/s 80P of the Act.
3.1 The AO further held that two judgments pronounced by SMC Bench of this Tribunal in the case of Halarpur Pattina Souhakari Nayamitha vs ITO dated 2607.20 19 and Siddhartha Pattina Souharda Sahakari Niyamita vs ITO dated 26.07.20 19 cannot be taken into consideration due to following reasons:
