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2020 (5) TMI 112 - AT - Income TaxDeduction u/s 80P(2)(a)(i) - denying the deduction holding assessee was registered under the Karnataka Souharda Act of 1997 under which only co-operatives and co-operative societies were registered - HELD THAT - As decided in Siddartha Pattina Souharda Sahakari Niyamitha v. ITO 2019 (7) TMI 1390 - ITAT BANGALORE Souharda co-operatives are also one form of co-operative societies registered under a law in force in the State of Karnataka for registration of co-operative societies. Therefore the conclusion of the revenue authorities that co-operative societies and co-operatives are different and that co-operative registered as Souharda Sahakari cannot be regarded as co-operative societies is unsustainable. We therefore hold that the Assessee should be allowed deduction u/s.80P(2)(a)(i) as the ground on which the same was denied to the Assessee is held to be incorrect. Other conditions for allowing deduction u/s. 80P(2)(a)(i) of the Act needs to be examined by the AO. Remand the question of allowing deduction u/s. 80P(2)(a)(i) of the Act to the AO except the issue already decided above. Appeal filed by the assessee is allowed for statistical purposes
Issues:
1. Denial of deduction u/s 80P(2)(a)(i) of the Income Tax Act. 2. Interpretation of the term "Co-operative society" under section 2(19) of the Act. 3. Assessment of the appellant as AOP instead of a co-operative society. 4. Failure to follow a binding decision of the jurisdictional Tribunal. 5. Liability to pay interest under section 234B and 234C of the Act. Analysis: Issue 1: Denial of deduction u/s 80P(2)(a)(i) of the Income Tax Act The appellant, a cooperative registered under the Karnataka Souharda Sahakari Act, 1997, claimed a deduction under section 80P(2)(a)(i) of the Act. The Assessing Officer (AO) denied the deduction, stating that only co-operatives and co-operative societies were registered under the said Act. The CIT(A) upheld this view. However, the ITAT Bangalore Benches, in a similar case, held that Souharda Sahakari registered under the Act can be regarded as co-operative societies entitled to the benefit of deduction u/s 80P(2)(a)(i). The Tribunal remitted the matter to the AO for fresh consideration, ultimately allowing the deduction. Issue 2: Interpretation of the term "Co-operative society" under section 2(19) of the Act The definition of "co-operative society" under section 2(19) includes societies registered under any law of a State for the registration of co-operative societies. The Tribunal emphasized that Souharda cooperatives, operating on cooperative principles, should be considered as co-operative societies entitled to deduction under section 80P(2)(a)(i) of the Act. The historical background of cooperative movements and legislative developments in Karnataka supported this interpretation. Issue 3: Assessment of the appellant as AOP instead of a co-operative society The AO assessed the appellant in the status of AOP, contrary to the appellant's filing as a co-operative society. The Tribunal held that the appellant should be assessed as a co-operative society, emphasizing the importance of correct classification for tax treatment. The order assessing the appellant as AOP was deemed bad in law. Issue 4: Failure to follow a binding decision of the jurisdictional Tribunal The CIT(A) failed to follow a binding decision of the jurisdictional Tribunal, which had relevance to the appellant's case. The Tribunal emphasized the importance of consistency and adherence to precedents in tax matters. The failure to consider the binding decision was a significant error in the appeal process. Issue 5: Liability to pay interest under section 234B and 234C of the Act The appellant denied liability to pay interest under sections 234B and 234C due to the absence of additional tax liability as determined by the AO. The Tribunal noted discrepancies in the imposition of interest and the lack of clarity in the order. The interest levied was deemed not in accordance with the law, warranting cancellation. In conclusion, the Tribunal allowed the appeal, remitting the matter to the AO for fresh consideration in line with the principles established in previous judgments. The decision emphasized the correct interpretation of the law, classification of entities, adherence to precedents, and proper imposition of tax liabilities and interest.
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