2021 (9) TMI 806 - AT - Income Tax

Deduction u/s 80P - Deduction in respect of income of Co-operative Societies - whether a souharda registered under the Karnataka SouhardaSahakari Act, 1997 can be regarded as co-operative society entitled to benefit of deduction u/s.80P(2)(a)(i)? - HELD THAT - As relying on Swabhimani Souharda Credit Co-operative Ltd. 2020 (1) TMI 831 - KARNATAKA HIGH COURT we are of the view that the assessee should be allowed deduction under section 80P(2)(a)(i) of the Act and the CIT(A) was justified in doing so. Except the ground that the Assessee was not a co-operative society entitled to deduction u/s.80P(2)(a)(i) of the Act, no other reasons were given for denying the benefit of the said deduction to the Assessee. Hence, the order of CIT(A) is upheld. - Decided against revenue.

Summary

Issues:
- Interpretation of section 80P(2)(a)(i) of the Income Tax Act, 1961.
- Whether a cooperative registered under the Karnataka Souharda Co-operative Act, 1997 is entitled to deduction under section 80P(2)(a)(i) of the Act.

Analysis:
1. The primary issue in this case was the interpretation of section 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer (AO) contended that the benefit of deduction under this section was only available to a cooperative society, not a cooperative. The AO argued that since the entity in question was a souhardasahakari registered under the Karnataka SouhardaSahakari Act, 1997, it did not qualify as a cooperative society eligible for the deduction. The AO relied on the distinction between cooperatives and cooperative societies under the relevant Acts and emphasized that only cooperative societies were entitled to the deduction.

2. The Commissioner of Income Tax Appeals (CIT(A)) reversed the AO's decision, citing a judgment by the Hon'ble Karnataka High Court in a similar case. The High Court held that entities registered under the Karnataka SouhardaSahakari Act, 1997 fell within the definition of a cooperative society as per section 2(19) of the Income Tax Act, and thus were eligible for the benefit of section 80P. The CIT(A) upheld the assessee's claim for deduction under section 80P(2)(a)(i) based on this judgment.

3. The Tribunal, upon hearing the appeal, considered the arguments presented by both parties. The Tribunal noted that the issue of whether a souharda registered under the Karnataka SouhardaSahakari Act, 1997 could be considered a cooperative society entitled to the deduction was raised for the first time before it. The Tribunal remanded the issue back to the AO for fresh consideration, emphasizing the need for a thorough examination of the legal arguments raised.

4. Ultimately, the Tribunal referred to the decision of the Hon'ble Karnataka High Court in the case of SwabhimaniSouharda Credit Co-operative Ltd., which extensively analyzed the definitions and provisions of the relevant Acts. The High Court concluded that entities registered under the Karnataka SouhardaSahakari Act, 1997 met the criteria of a cooperative society as defined in the Income Tax Act. Therefore, the Tribunal upheld the CIT(A)'s decision to allow the deduction under section 80P(2)(a)(i) for the assessee, dismissing the appeal by the revenue.

In conclusion, the judgment clarified the eligibility of entities registered under the Karnataka SouhardaSahakari Act, 1997 for deduction under section 80P(2)(a)(i) of the Income Tax Act, based on a detailed analysis of the relevant legal provisions and precedents.