2020 (11) TMI 899 - AT - Income Tax

Disallowance u/s 80P(2)(a)(i) - AO disallowed the claim of deduction u/s 80P(2)(a)(i) on the reason that the assessee is in the business of Banking - HELD THAT - As decided in own case M/s. Swabhimani Souharda Credit Co-operative Ltd 2020 (1) TMI 831 - KARNATAKA HIGH COURT the employment of the word Sahakari in the very title of the 1997 Act is also not sans any significance; Sahakaar in Sanskrit is the equivalent of sahakaara in Kannada which means co-operation ; as already mentioned above both the 1959 Act and the 1997 Act employ this terminology; the 1997 Act is woven with the principles of co-operation; sec.4 of this Act bars registration of an entity unless its main objects are to serve the interest of the members in the area of co-operation and its bye-laws provide for economic and social betterment of its members through self-help mutual aid in accordance with the cooperative principles; this apart, even sub-section (2) of sec.4 is heavily loaded with co-operative substance. These writ petitions succeed; a declaration is made to the effect that the entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of co-operative society as enacted in sec.2(19) of the Income Tax Act, 1961 and therefore subject to all just exceptions, petitioners are entitled to stake their claim for the benefit of sec.80P - remit the issue in dispute to the file of Assessing Officer to decide afresh in the light of above judgement after giving an opportunity of hearing to the assessee.

Summary

Issues:
Appeal against disallowance of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.

Detailed Analysis:
1. The appeals were filed against orders of the Commissioner of Income Tax for the Assessment Years 2014-15 to 2016-17. The main issue in these appeals was the disallowance of the claim of deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961.

2. The Assessing Officer disallowed the deduction claiming that the assessee was in the business of banking. The CIT (Appeals) upheld this decision, leading the assessee to appeal before the tribunal.

3. The tribunal referred to a High Court judgment in a similar case, emphasizing the need to interpret Section 80P liberally to promote the cooperative movement in the country. The judgment highlighted the definition of a cooperative society under the Income Tax Act and related state laws, emphasizing the importance of cooperative principles and registration under specific acts.

4. The tribunal noted that the Karnataka Souharda Sahakari Act, 1997, and the Karnataka Co-operative Societies Act, 1959, were enacted to promote cooperative societies based on self-help and mutual aid. The Acts aimed to encourage cooperative enterprises and remove unnecessary restrictions, emphasizing the importance of cooperative principles and voluntary formation.

5. The tribunal compared the definitions of a cooperative society under the two Acts, highlighting their similarity in content and purpose. It noted that entities registered under these Acts should be considered cooperative societies for the purpose of claiming deductions under Section 80P of the Income Tax Act.

6. In light of the above judgment and analysis, the tribunal remitted the issue back to the Assessing Officer for fresh consideration, allowing the assessee to raise any other relevant issues. The tribunal applied the same decision to other appeals related to the matter.

7. Consequently, the appeals of the assessee were partly allowed for statistical purposes, and the decision was pronounced in open court. The judgment emphasized the need for a broad and liberal interpretation of Section 80P to promote the cooperative movement and encourage cooperative enterprises in the country.