Vitthalray Souharda Pattin Sahakari Niyamit Vs Union of India ( Karnataka High Court)
Summary: The Karnataka High Court, Dharwad Bench, held that a society registered under the Karnataka Souharda Sahakari Act, 1997 is a “co-operative society” within the meaning of Section 2(19) of the Income-tax Act, 1961 and is therefore entitled to claim the benefit of Section 80P, subject to the other statutory conditions and exceptions.
Shri Vitthalray Souharda Pattin Sahakari Niyamit, a Souharda society engaged in banking and providing credit facilities to its members, challenged an assessment order dated 5 December 2019 by which the Income-tax Department treated it as not being a co-operative society for purposes of Section 2(19). The petitioner also challenged the freezing of its bank accounts.
The High Court noted that the issue had already been decided by the Principal Bench in W.P. No.48414 of 2018 and connected proceedings, where it was held that entities registered under the Karnataka Souharda Sahakari Act fit within Section 2(19) of the Income-tax Act. The Dharwad Bench followed that decision on the principle of parity.
The Court consequently declared the Income-tax Department’s interpretation to be arbitrary, illegal and ultra vires the Constitution, besides being violative of Articles 14 and 19(1)(c). The assessment order was quashed, and the Assessing Officer was directed to pass a fresh order treating the petitioner as a co-operative society and extending the benefit under Section 80P, subject to the exceptions and conditions contained in the earlier judgment.
The Court also quashed the order freezing the petitioner’s bank accounts.
FULL TEXT OF THE JUDGMENT/ORDER OF KARNATAKA HIGH COURT
The petitioner Shri Vitthalray Souharda Pattin Sahakari Niyamit, is a society registered under the Karnataka Souharda Sahakari Act, 19978 (hereinafter referred to as the ‘Souharda Act’) engaged in the business of banking and providing credit facilities to its members has filed this Writ Petition under Article 226 and 227 of the Constitution of India to quash the impugned assessment order No.ITBA/AST/S/144/ 2019-20/1021747062(1) dated 05.12.2019 vide annexure-A and to declare that the petitioner-Society registered under the Souhardha Act, 1997 being par with the cooperative society registered under Karnataka Cooperative Societies Act, 1959 is entitled to claim the benefit in terms of the scheme under Section 80P of the Income Tax Act, 1961. Consequently, to issue a writ of mandamus directing the 3rd respondent to de-freeze the bank accounts of the petitioner with the Syndicate Bank, Harugeri Branch, Raibag Taluka, Belagavi District.
2. The learned AGA has accepted notice for respondent No.4. Learned counsel Sri.Y.V.Raviraj has accepted the notice for respondent Nos.2 and 3 and learned counsel Sri.M.B.Kanavi has accepted the notice for respondent No.1.
3. The subject matter of this writ petition is substantially identical to the one stated in Writ Petition No.48414 of 2018(T-TI) between M/s Swabhimani Souharda Credit Cooperative Ltd vs. Government of Indian and others disposed of vide order dated 16.01.2020. M/s Swabhimani Souharda Credit Cooperative Ltd vs. Government of India and others
4. The learned counsel for the petitioner submits that the writ petition namely No.108723/2018(T-IT) and No. 118238/2020(T-IT) have been disposed of by the Dharwad Bench by following the decision in aforesaid Writ Petition No. 48414 of 2018(T-TI). Hence, the same relief needs to be extended on the principle of parity as the facts and circumstances are similar in nature.
5. In Writ petition No.2738 of 2020 (T-IT) the learned Senior counsel representing the respondent has submitted that the Judgment/order passed in Writ Petition Nos.48414 of 2018 clubbed with Writ Petition No.14381 of 2019 (T-IT) has not been challenged and no review is sought.
6. In Writ Petition Nos.48414 of 2018 and connected writ petition the principal bench of High Court of Karnataka, Bengaluru had framed the following issue for its consideration:
“Whether an entity registered under the Karnataka Souharda Sahakari Act, 1997 fits into the definition of “co-operative society” as enacted by Section 2(19) of the Income Tax Act, 1961 for the purpose of Section 80P thereof”.
7. On referring to the relevant provisions of Karnataka Souharda Sahakari Act, 1997, Karnataka Cooperative Societies Act, 1959 and Section 80(P)(2)(a)(i) of the Income Tax Act, 1961 it is held as under:
“In the above circumstances, these writ petitions succeed; a declaration is made to the effect 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 Income Tax Act, 1961 and therefore subject to all just exceptions, petitioners are entitled to stake their claim for the benefit of Section 80P of the said Act; a Writ of Certiorari issues quashing the impugned notice dated 30.3.2018 at Annexure-D in WP No. 48414/2018; other legal consequences accordingly do follow.
It is needless to mention that the other provisions of Section 80P of 1961 Act and their effect on the claim of the petitioner-like-societies have been left to be addressed by the concerned authorities.”
8. The substantial question of law being the same in the present writ petition. The decisions rendered by the Principal Bench in the aforesaid writ petitions are aptly applicable and holds good. Hence, the present writ petition deserves to be disposed of in terms of the order dated 16.01.2020 in Writ Petition No.48414 of 2018 and connected writ petition.
9. It is hereby declared that the interpretation adopted by the 3rd respondent that the petitioner- Shri Vittalray Souharda Pattin Sahakari Niyamit registered under the Karnataka Souharda Sahakari Act, 1997 is not a cooperative society within a definition of Cooperative Society under Section 2(19) of Income Tax Act is arbitrary, illegal and ultra vires the constitution and violative of Article 14 and 19(1)(c) of the constitution of India. Consequently, the order of assessment No. ITBA / AST / S / 144 / 2019-20 / 1021747062 (1) dated 05.12.2019 is quashed.
10. The respondent No.3 is directed to pass fresh order treating the petitioner as a cooperative society extending the benefit under Section 80P of Income Tax Act, 1961 with all other exceptions as observed in the order dated 16.01.2020 in Writ Petition No.48414 of 2018 (T-IT) and connection writ petition.
11. The order issued by the 3rd respondent to freeze the Bank Account No.0560/303/148 and 560/ 214/27 of the petitioner in Syndicate Bank, Harugeri Branch is also quashed.
