Government of India Vs Karnataka State Souharda Federal Co-operative Ltd. (Karnataka High Court)
Summary: The Karnataka High Court considered whether co-operatives registered under the Karnataka Souharda Sahakari Act, 1997 qualify as “co-operative societies” under Section 2(19) of the Income-tax Act, 1961 and are consequently eligible to claim deduction under Section 80P of the Act.
The common judgment disposed of W.A.No.378/2020, W.A.No.406/2020 and connected Income Tax Appeals Nos.832/2018, 833/2018, 869/2018, 295/2019 and 330/2019. The assessees claimed to be co-operatives registered under the Karnataka Souharda Sahakari Act, 1997 and engaged in promoting the interests of their members. The Writ Court had held that entities registered under the Souharda Act fit within the definition of “co-operative society” under Section 2(19) of the Income-tax Act and were entitled, subject to the statutory conditions, to claim the benefit of Section 80P. The Revenue challenged that conclusion.
The Revenue contended that Section 2(19) contemplated societies registered under the Co-operative Societies Act, 1912 or under a law providing for registration of co-operative societies, and argued that registration under the Souharda Act did not confer the requisite status. It was also argued that the Souharda Act’s separate definitions of “Co-operative” and “Co-operative Society” had to be respected, and that the State enactment could not override the Income-tax Act. Article 254 of the Constitution was relied upon in support of the submission concerning inconsistency between Central and State legislation.
