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.
