2020 (2) TMI 615 - AT - Income Tax

Reduction of deduction claimed by the assessee u/s 80P - assessee is a Souharda Cooperative registered under Karnataka Souharda Sahakari Act 1997 who provides credit facilities to its members - HELD THAT - The Hon ble Karnataka High Court in the case of M/s Swambhimani Souhard Credit Cooperative Society Ltd. 2020 (1) TMI 831 - KARNATAKA HIGH COURT has examined the issue of applicability of provision of sec. 80P of the Act to the cooperative registered under Karnataka Souhards Sahakari Act 1997 and held that assessee is entitled for deduction u/s 80P of the Act. However as rightly pointed by ld DR there was no occasion for the AO to examine the claim of the assessee in terms of provisions of sec. 80P of the Act. Accordingly we set aside the order passed by the ld CIT(A) and restore the issue to the file of the AO for examining the same in accordance with the provisions of sec. 80P of the Act. The assessee should be provided adequate opportunity of being heard.

Summary

Issues:
Reduction of deduction claimed by the assessee u/s 80P of the Income Tax Act.

Analysis:

Issue 1: Reduction of deduction claimed u/s 80P of the Act
- The appellant, a Souharda Cooperative registered under Karnataka Souharda Sahakari Act 1997, claimed deduction u/s 80P of the Act for providing credit facilities to its members.
- The Assessing Officer (AO) and the ld CIT(A) held that the deduction u/s 80P is available only to cooperative societies, not to Souharda cooperatives, as they considered them as different entities.
- The appellant relied on a decision by the Hon'ble Karnataka High Court in a similar case, where it was held that entities registered under Karnataka Souharda Sahakari Act, 1997, fit the definition of a cooperative society under sec. 2(19) of the Income-tax Act.
- The High Court emphasized the liberal construction of sec. 80P to promote the cooperative movement, irrespective of varying nomenclatures of entities registered under different cooperative acts.
- The Tribunal, following the High Court's decision, allowed the deduction u/s 80P for the appellant but acknowledged that the AO did not examine the claim properly.
- The Tribunal set aside the order of the ld CIT(A) and directed the AO to re-examine the claim of the assessee in accordance with the provisions of sec. 80P, ensuring the appellant's right to be heard.

This judgment clarifies the eligibility of Souharda cooperatives for deduction u/s 80P of the Income Tax Act, aligning with the broader objective of promoting the cooperative movement. The decision underscores the importance of a liberal interpretation of tax provisions to encourage cooperative activities, emphasizing the need for tax authorities to thoroughly examine claims in accordance with the law.