In a relief to entities registered under the Karnataka Souharda Sahakari Act, 1997, the Karnataka High Court has declared that they also “fit into the definition of cooperative society in the Income Tax (I-T) Act, 1961” and are “entitled to stake their claim for the benefit” of deduction of income from certain sources under Section 80P of the I-T Act.
Justice Krishna S. Dixit delivered the verdict while allowing petitions filed by M/s Swabhimani Souharda Credit Cooperative Ltd., and Karnataka State Souharda Federal Cooperative Ltd.
The I-T Department had contended that only entities registered under the Karnataka Co-operative Societies Act, 1959 can seek exemptions under Section 80P of the I-T Act, as the 1997 law does not fall under the definition of “co-operative society” under Section 2(19) of the I-T Act.
Disagreeing with the I-T Department’s contention, the Court said that the provisions of exemption in deduction from taxable income under Section 80P were enacted by the Parliament for promoting the cooperative movement in India and this provision needs to be liberally construed to effectuate the legislative object of encouraging and promoting the growth of the cooperative movement.
Analysing the preambles and various provisions of the 1959, and the 1997 laws, the Court said they lead to an irresistible conclusion that they are both cognate statutes that deal with cooperative societies, regardless of some difference in their nomenclature, and functionality.
All entities, which are registered under the enactments relating to cooperative societies regardless of their varying nomenclatures, need to be treated as cooperative societies, the Court added.
