G M Souharda Pattina Sahakara Nyt Vs ITO (ITAT Bangalore)
Souharda Society Wins 80P Deduction – ITAT Rejects Technical Denial & Expands Benefit
In G M Souharda Pattina Sahakara Niyamitha, the Bangalore ITAT dealt with denial of deduction u/s 80P(2)(a)(i) to a Souharda co-operative society.
The Assessing Officer had denied deduction on the ground that:
- The assessee was not registered under the Karnataka Co-operative Societies Act, and
- Allegedly earned income from non-members.
The CIT(A) also denied deduction relying on Mavilayi Service Co-operative Bank Ltd.
However, the ITAT held:
- A society registered under the Karnataka Souharda Sahakari Act, 1997 is still a co-operative society u/s 2(19).
- Hence, it is eligible for deduction u/s 80P.
- There was no evidence of dealings with non-members, and even otherwise, judicial precedents support eligibility.
Relying on Karnataka High Court rulings (Totagars, Tumkur Merchants) and SC ruling in Mavilayi, ITAT clarified:
- Deduction u/s 80P cannot be denied on technical registration grounds.
- Income from providing credit facilities to members (including nominal members) qualifies for deduction.
Additional important ruling:
- Disallowance (e.g., TDS default) increases business income – That increased income is also eligible for 80P deduction (same source principle).
Souharda societies are not second-class co-ops-they qualify for 80P. And once income is business-attributable, even additions boost deduction, not tax.
FULL TEXT OF THE ORDER OF ITAT BANGALORE
Paid content
Become a Premium Member, or log in if you are already a Premium member.
