2020 (6) TMI 510 - HC - Income Tax

Deduction u/s 80P - Whether an entity registered under the Karnataka Souharda Sahakari Act, 1997 fits into the definition of co-operative society as enacted by Section 2(19) for the purpose of Section 80P thereof? - HELD THAT - Interpretation adopted by the 3rd respondent that the petitioner- Shri Vittalray Souharda Pattin Sahakari Niyamit registered under the Karnataka Souharda Sahakari Act, 1997 is not a cooperative society within a definition of Cooperative Society under Section 2(19) of Income Tax Act is arbitrary, illegal and ultra vires the constitution and violative of Article 14 and 19(1)(c) of the constitution of India. Consequently, the order of assessment is quashed. The respondent No.3 is directed to pass fresh order treating the petitioner as a cooperative society extending the benefit under Section 80P of Income Tax Act, 1961 with all other exceptions as observed in the order and connection writ petition.

Summary

Issues:
1. Interpretation of whether an entity registered under the Karnataka Souharda Sahakari Act, 1997 qualifies as a "co-operative society" under Section 2(19) of the Income Tax Act, 1961 for claiming benefits under Section 80P.
2. Legality of the assessment order dated 05.12.2019 freezing the bank accounts of the petitioner.
3. Application of the principle of parity in extending relief to the petitioner based on similar cases.
4. Compliance with constitutional provisions and legal standards in the assessment process.

Issue 1: Interpretation of "co-operative society" under Section 80P:
The High Court analyzed the provisions of the Karnataka Souharda Sahakari Act, 1997, the Karnataka Cooperative Societies Act, 1959, and Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Court declared that entities registered under the Karnataka Souharda Sahakari Act, 1997 indeed fall within the definition of a "co-operative society" as outlined in Section 2(19) of the Income Tax Act, 1961. Consequently, the petitioners are entitled to claim benefits under Section 80P, and the impugned notice was quashed.

Issue 2: Legality of assessment order and bank account freeze:
The Court found that the interpretation by the 3rd respondent, stating that the petitioner was not a cooperative society as per the definition under the Income Tax Act, was arbitrary, illegal, and in violation of constitutional provisions. As a result, the assessment order dated 05.12.2019 was deemed quashed, and the 3rd respondent was directed to issue a fresh order treating the petitioner as a cooperative society eligible for benefits under Section 80P. Additionally, the order to freeze the petitioner's bank accounts was also quashed.

Issue 3: Principle of parity and similar cases:
The Court noted the disposal of other writ petitions and the application of the principle of parity in extending relief to the petitioner based on similar cases. The decisions rendered in previous writ petitions were deemed applicable to the present case, justifying the extension of the same relief to maintain consistency and fairness in legal outcomes.

Issue 4: Compliance with constitutional provisions:
In the judgment, the Court emphasized that the interpretation denying the petitioner's status as a cooperative society was not only arbitrary and illegal but also contravened the constitutional provisions of Article 14 and 19(1)(c) of the Indian Constitution. By quashing the assessment order and directing a fresh assessment treating the petitioner as a cooperative society, the Court ensured compliance with constitutional principles and legal standards in the assessment process.

This detailed analysis of the judgment highlights the key issues addressed by the High Court in the case, providing a comprehensive overview of the legal reasoning and outcomes in each aspect of the decision.