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TMI Blog2024 (3) TMI 1430X X X X Extracts X X X X X X X X Extracts X X X X ..... der The Karnataka Souharda Sahakari Act, 1997, which was not a society as envisaged under Karnataka Cooperative Societies Act, 1959, the exemption available in terms of Section 2 (19) of the Income Tax Act exemption available under 194A (3) (V) of the Income Tax was not admissible for non deductible TDS of the petitioner society. In this context, learned counsel for the petitioner points out that definition clause contained in Section 219 of the IT Act is wide enough to encompass a Co-operative Society including societies registered under Karnataka Cooperative Societies Act, 1959 as well as The Karnataka Souharda Sahakari Act, 1997, as held by the Hon'ble Division Bench in the case of Govt. of India Vs Karnataka State Souharda Federal Co-operative Ltd., WA.No.378/2020 and connected matters dated 20.12.2021 which includes the case of petitioner also in the different Assessment Year. It is therefore submitted that the impugned show cause notice issued by the respondent apart from being illegal and arbitrary was also without jurisdiction or authority of law and contrary to the provisions of the Act as well as the dictum of the Hon'ble Division Bench and the same deserves to be quashed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... c enterprises guided by co-operative principles and matters connected therewith; Whereas it is expedient to provide for recognition, encouragement and voluntary formation of co-operatives based on self-help, mutual aid, wholly owned, managed and controlled by members as accountable, competitive, self-reliant and economic enterprises guided by co-operative principles and for matters connected therewith." 21. Preamble to the Souharda Act reads thus: "Whereas it is expedient to provide for recognition, encouragement and voluntary formation of co-operatives based on self-help, mutual aid, wholly owned, managed and controlled by members as accountable, competitive, self-reliant and economic enterprises guided by co-operative principles and for matters connected therewith; Be it enacted by the Karnataka State Legislature in the Forty-eighth Year of Republic of India as follows-" 22. Preamble to the Co-operative Societies Act, 1959 reads thus: "Whereas it is expedient [to promote voluntary formation, autonomous functioning, democratic control and professional management of co-operative societies in the State of Karnataka; Be it enacted by the Karnataka State Legislature in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the following, namely:- ............ We now turn to the proper interpretation of Section 80P of the IT Act. Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative societies" is important, in that it indicates the general "drift" of the provision. This was so held by this Court in K.P. Varghese v. Income Tax Officer, Ernakulam and Anr. (1981) 4 SCC 173 as follows: "9. This interpretation of sub-section (2) is strongly supported by the marginal note to Section 52 which reads "Consideration for transfer in cases of understatement". It is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or, to use the words of Collins, M.R. in Bushel v. Hammond [(1904) 2 KB 563] to show what the section is dealing with. It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, bein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Apex Court, it is unnecessary to probe as to whether the Co-operative Society is classified further. In this recent judgment, the Hon'ble Apex Court has observed that the provision is introduced with a view to encourage and promote the growth of Co-operative Society in the economic life of Country and in pursuance of the declared policy of the Government. The factum of a Co-operative Society being registered under the 1912 Act or under the State law is the test. Co-operatives being registered under the Souharda Act, a State law, certainly comes within the ambit of Co-operative Society. 25. The Constitution of India has been amended by incorporation of Part-IX-B. On 15.02.2012 vide S.O.265[E], dated 08.02.2012 under the heading "The Co-operative Societies", Article 243-ZH[c] of the Constitution of India defines "Co-operative Societies" as under:- "[c] "Co-operative Society" means a society registered or deemed to be registered under any law relating to co-operative societies for the time being in force in any State", Article 243-ZI of the Constitution of India authorizes formation of co-operative societies by the State Legislature. Article 243-ZI of the Constitution of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d closure of the Co-operative Societies. Though the aforesaid two Acts are parallel but are in respect of Co-operatives in the State as the name suggests. 29. It could be inferred that once the entities are governed by the Co-operative Principles under the law in force and registered under the State enactment, which by implication or otherwise shall only have a same meaning of Co-operative Society. 30. Both these Acts [Souharda Act and Cooperative Societies Act, 1959] would come within the ambit of Article 246 [3] read with Entry 32 of the List-II of Schedule - VII of the Constitution of India. 31. The provisions of Section 47 of the Co-operative Societies Act, 1912 imposes a bar on the use of the Co-operative, which is extracted hereunder: "47. Prohibition of the use of the word "co-operative".- (1) No person other than a registered society shall trade or carry on business under any name or title of which the word "co-operative" is part without the sanction of the State Government: Provided that nothing in this section shall apply to the use by any person or his successor-in-interest of any name or title under which he traded or carried on business at the date on which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ge in extending the benefit of Section 80P to the entities registered under the Souharda Act." 8. As can be seen from the statutory provisions and the judgment of the Hon'ble Division Bench referred to supra, the petitioner society being undisputedly Cooperative Society registered under The Karnataka Souharda Sahakari Act, 1997, the exemption for TDS under Section 194A (3) V of the IT Act, is clearly admissible in so far as the petitioner society is concerned and consequently the impugned show cause notice is clearly without jurisdiction or authority of law and the same is being illegal and arbitrary, no useful purpose would be served by continuing the service pursuant to the impugned show cause notice. To reiterate, the entire claim of the respondent in the show cause notice is to the effect that the provisions of Section 194A (3) (V) were not applicable to the petitioner since the same was not a Cooperative Society within the meaning of the Section 2 (19) of the IT Act. However, in the light of the judgment of the Hon'ble Division Bench and the wide and expansive definition contained in Section 2 (19) which includes the petitioner society which has been registered under the prov ..... X X X X Extracts X X X X X X X X Extracts X X X X
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