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TMI Blog2025 (5) TMI 1331X X X X Extracts X X X X X X X X Extracts X X X X ..... .330/2019 along with other connected matters dated 20.12.2021. (iii) Declare that the petitioner is a co-operative society as per the provisions of the Act and consequently it is not required to deduct tax at source on the interest payments made to its member as per the provisions of section 194A(3)(v) of the Income Tax Act, 1961. (iv) And pass such other orders as this Hon'ble Court deems fit and proper in the interest of justice and equity." 2. A perusal of the material on record would indicate that the present petition relates to the financial years 2015-16, 2016-17, 2017-18 and 2018-19. Further, in relation to the very same petitioner herein and in response to the financial year 2014-15 under identical circumstances, this Court, in W.P.No.6660/2022 disposed of on 19.03.2024 held as under: "ORDER In this petition, petitioner seeks quashing of the impugned show cause notice at Annexure - A dated 11.02.2022 issued by the respondent to the petitioner for the FY 2014-15 and for other reliefs. 2. Heard learned counsel for the petitioner and learned counsel for the respondent and perused the material on record. 3. In addition to re-iterating the various contentions urge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s wide enough to include the petitioner society which would register under The Karnataka Souharda Sahakari Act, 1997, held as under: "19. Statement of objects and reasons to Karnataka Act No.17/2000 [Souharda Act] reads thus: "The Karnataka Souhardha Sahakari Bill, 1997 among other things provide for.- (1) the 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 specified therein; (2) removing all kinds of restrictions that have come to clog the free functioning of the cooperatives and the controls and interference by the Government except registration and cancellation; (3) promotion of subsidiary organisation, partnership between co-operatives and also collaboration between co-operatives and other institutions; (4) registration of co-operatives, union cooperatives and Federal Co-operative in furtherance of the objectives specified above; (5) conversion of co-operative societies registered under the Karnataka Co-operative Societies Act, 1959 as a co-operative under the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax Act, 1961 also amongst other enactment specified therein. By substituting amongst the others "The Income Tax Act, 1961" it has been clarified that for the purpose of the Income Tax Act, Co-operative under Souharda Act is a Co-operative Society as such, the assesses are entitled for the benefit of Section 80P of the Income Tax Act, 1961. It cannot be gainsaid that the amendment by substitution relates back to the date of original enactment unless specified from a particular date. In the absence of any specified date mentioned, the Amended Act certainly relates back to the date of enactment. 24. In the case of Mavilayi Service Co-operative Bank Ltd., V/s. Commissioner of Income Tax, Calicut [(2021) 123 taxmann.com 161 (SC)], the Hon'ble Apex Court has held thus: "11. Having heard learned counsel for the assessees as well as for the Revenue, it is first important to set out sections 2(19) and 80P of the Income Tax Act, which read as follows: "2. In this Act, unless the context otherwise requires,- xxx xxx xxx (19). "co-operative society" means a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any law for the tim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hirdly, the gross total income must include income that is referred to in sub-section (2). 30. Fourthly, sub-clause (2)(a)(i) with which we are directly concerned, then speaks of a co-operative society being "engaged in" carrying on the business of banking or providing credit facilities to its members. What is important qua sub-clause (2)(a)(i) is the fact that the co-operative society must be "engaged in" the providing credit facilities to its members. As has been rightly pointed out by the learned Additional Solicitor General, the expression "engaged in", as has been held in Commissioner of Income Tax, Madras v. Ponni Sugars and Chemicals Ltd. (2008) 9 SCC 337, would necessarily entail an examination of all the facts of the case. This Court in Ponni Sugars and Chemicals Ltd. (supra) held: "20. In order to earn exemption under Section 80- P(2) a cooperative society must prove that it had engaged itself in carrying on any of the several businesses referred to in sub- section (2). In that connection, it is important to note that under subsection (2), in the context of cooperative society, Parliament has stipulated that the society must be engaged in carrying on the business of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e shall Endeavour to promote voluntary formation, autonomous functioning, democratic control and professional management of cooperative societies." 26. The fallout of the object and reasons and the subsequent amendment which takes the forefront by this 97th Constitution Amendment is appreciating "Co-operative movement." By incorporating part IXB in the Constitution under the head "The Cooperative Society" and making it part of directive principles of the state policy, it becomes explicit that the co-operative movement is top priority of the Central Government's Policy and its implementation. 27. Merely, because separate definitions are provided for the words "Co-operative" and "Cooperative Society" under Section 2[e] and [g] respectively of Sec.2 of Souharda Act, it cannot be construed as their characteristic is different, since their nomenclature is different. Importance has to be given to the word "Co-operative" which is found in both the enactments i.e., Act No.11 of 1959 and Act No.17 of 1997, as adjective pre-fixed to the noun that means the characteristic of the organization/institution while applying the principle of hormonial construction and interpretation of the law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase. The judgments cited by the learned counsel for the Revenue inasmuch as Articles 246 and 254 would be of no assistance in adjudicating the dispute in the case on hand. If a strict literal interpretation is given to the word 'Co-operative' as canvassed by the learned counsel for the Revenue, in the absence of rate of tax fixed for such 'Co-operative', no tax liability would arise in the light of the judgment of the Hon'ble Apex Court in the case of Govind Saran Ganga Saran supra. Hence, the said arguments are negated. 33. The provisions of Section 80P offers tax deduction in respect of income of Co-operative Societies which is enacted with a laudable object of promoting Co-operating moment. Such benefit cannot be denied to the so called Co-operatives under the Souharda Act merely on hyper technicalities. The interpretation given by the Revenue to Section 2[19] of the Act is untenable. A harmonious reading of the said provisions would indicate that Co-operative Society registered under the Co-operative Societies Act, 1959 alone is not the Co-operative Society for the purposes of the Income Tax Act, as the phrase 'or' employed with the following words 'under any other law for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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