2019 (12) TMI 1277 - AT - Income Tax

Deduction u/s 80P(2)(a)(i) - HELD THAT - Assessee s claim regarding deduction u/s. 80P(2)(a)(i) cannot be rejected on this basis that assessee is a Souharda Sahakari and therefore, cannot be regarded as a co-operative society. But after holding so, set aside the order of CIT(A) and restore the matter back to the AO for fresh decision regarding allowability of deduction u/s. 80P(2)(a)(i) after examining other conditions for allowing such deduction because those conditions are not examined by the AO till now.

Summary

Issues Involved:
1. Eligibility of the assessee to claim deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961.
2. Whether Souharda Sahakari can be regarded as a cooperative society under the Income Tax Act, 1961.

Detailed Analysis:

1. Eligibility of the Assessee to Claim Deduction under Section 80P(2)(a)(i):
The primary issue in this case revolves around the eligibility of the assessee to claim a deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961. The assessee contended that the lower authorities erred in denying this deduction. The Tribunal noted that the Commissioner of Income Tax (Appeals) [CIT(A)] had based its decision on the precedence of the Division Bench's order over the SMC Bench's decision in similar cases.

The Tribunal referenced the SMC Bench's decision in the case of Siddartha Pattina Souharda Sahakari Niyamitha Vs. ITO, where it was held that Souharda Sahakari can be regarded as cooperative societies. The Tribunal emphasized that the issue should be decided on its merits rather than remanding it back to the Assessing Officer (AO) as previously done in similar cases.

2. Whether Souharda Sahakari Can Be Regarded as a Cooperative Society:
The Tribunal examined whether Souharda Sahakari, registered under the Karnataka Souharda Sahakari Act, 1997, could be considered a cooperative society under the Income Tax Act, 1961. The Tribunal highlighted that the definition of a "co-operative society" under section 2(19) of the Income Tax Act includes any cooperative society registered under any law in force in any state for the registration of cooperative societies.

The Tribunal discussed the principles of cooperation and the legislative history of cooperative societies, emphasizing that Souharda Sahakari operates on the same principles and should be considered as cooperative societies. The Tribunal cited the preamble and provisions of the Karnataka Souharda Sahakari Act, 1997, to support its conclusion that Souharda cooperatives are indeed a form of cooperative societies.

Conclusion:
The Tribunal concluded that the assessee's claim for deduction under section 80P(2)(a)(i) cannot be rejected solely on the basis that the assessee is a Souharda Sahakari. However, the Tribunal set aside the CIT(A)'s order and remanded the matter back to the AO for a fresh decision regarding the allowability of the deduction, instructing the AO to examine other conditions for allowing such a deduction.

The appeal filed by the assessee was allowed for statistical purposes, and the Tribunal's order was pronounced in the open court.

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