We are registered under the Karnataka Souharda Sahakari Act 1997, not the Karnataka Co-operative Societies Act 1959. The Assessing Officer says we are not a 'co-operative society' under s.2(19) and so cannot claim s.80P at all. Is that right?
No. The Karnataka High Court declared that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit the definition of 'co-operative society' in s.2(19) of the Income-tax Act, 1961 and are therefore entitled to stake their claim to the benefit of s.80P. The definition covers a society registered under the Co-operative Societies Act 1912 or under any other law for the time being in force in a State for the registration of co-operative societies, and the 1997 Act is such a law.
Decided by the High Court (Krishna S. Dixit J) on 2020-01-16, reported as Writ Petition No. 48414 of 2018 (T-IT) c/w Writ Petition No. 14381 of 2019 (T-IT) (Karnataka High Court, Bengaluru). It bears on section 2(19), section 80P, section 80P(1) of the Income Tax Act 1961, in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters.
This is a threshold objection, not a merits objection, and it is raised at the very start of many Karnataka assessments — if the entity is not a co-operative society at all, no part of s.80P can be reached and the entire deduction goes. The reasoning is portable: it turns on the breadth of 's.2(19)' and on the proposition that all entities registered under enactments relating to co-operative societies, whatever their nomenclature, are co-operative societies. Practitioners in other States facing the same objection about differently named registrations (mutually aided societies, self-help co-operatives) can run the same argument. Note the limit: the declaration only gets you through the door. Whether the particular income qualifies under sub-section (2) of s.80P is a separate enquiry, which Mavilayi Service Co-operative Bank (SC, 2021) confirms the Assessing Officer may conduct.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The first petitioner is a credit co-operative registered under the Karnataka Souharda Sahakari Act, 1997 (Karnataka Act No. 17 of 2000); the second is the Karnataka State Souharda Federal Co-operative Limited. A notice dated 30 March 2018 was issued to the first petitioner. The question framed by the Court was whether an entity registered under the 1997 Act fits the definition of 'co-operative society' in s.2(19) of the Income-tax Act, 1961 for the purpose of s.80P. The Court recorded that the rival submissions were made 'half heartedly' at the Bar.
The petitions succeeded. A declaration was made that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of 'co-operative society' as enacted in s.2(19) of the Income-tax Act, 1961, and that the petitioners are therefore, subject to all just exceptions, entitled to stake their claim for the benefit of s.80P. A writ of certiorari issued quashing the notice dated 30 March 2018 in W.P. No. 48414 of 2018. No costs.
Section 80P is enacted to promote the co-operative movement and must be liberally construed to effectuate that object, the more so since the right to form a co-operative society is a fundamental right under Article 19(1)(c) following the 97th Amendment with effect from 15 October 2013 (para 5(a)). The object of s.80P would be defeated if a restrictive meaning were given to s.2(19), because the availability of s.80P depends on the claimant being a co-operative society; on a purposive construction all entities registered under enactments relating to co-operative societies, whatever their nomenclature, must be treated as co-operative societies (para 5(b)). Karnataka has two such State enactments, the Karnataka Co-operative Societies Act, 1959 and the Karnataka Souharda Sahakari Act, 1997, both traceable to Article 246(3) read with Entry 32 of List II (para 5(c)). The Statement of Objects and Reasons of the 1997 Bill and the preambles of the two Acts show them to be cognate statutes on the same subject matter (paras 5(d) and 5(e)). The word 'co-operative' as defined in s.2(d-2) of the 1959 Act and s.2(e) of the 1997 Act is used as a noun and not an adjective, and s.7 of the 1997 Act makes a registered 'co-operative' a body corporate with perpetual succession despite the absence of the word 'society' as a postfix, just as s.9 of the 1959 Act does. Finally, 'Sahakari' means co-operation, and s.4 of the 1997 Act bars registration unless the main objects are to serve the interest of members in the area of co-operation on principles of self-help and mutual aid.
going by the text and context of these provisions, one can safely conclude that all entities that are registered under the enactments relating to co-operative societies, regardless of their varying nomenclatures need to be treated as co-operative societies;
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Handle my notice → Ask a CA on WhatsAppNo. The Karnataka High Court declared that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit the definition of 'co-operative society' in s.2(19) of the Income-tax Act, 1961 and are therefore entitled to stake their claim to the benefit of s.80P. The definition covers a society registered under the Co-operative Societies Act 1912 or under any other law for the time being in force in a State for the registration of co-operative societies, and the 1997 Act is such a law. This was decided by the High Court (Krishna S. Dixit J) and bears on section 2(19), section 80P, section 80P(1) of the Income Tax Act 1961. It is reported as Writ Petition No. 48414 of 2018 (T-IT) c/w Writ Petition No. 14381 of 2019 (T-IT) (Karnataka High Court, Bengaluru). This is a threshold objection, not a merits objection, and it is raised at the very start of many Karnataka assessments — if the entity is not a co-operative society at all, no part of s.80P can be reached and the entire deduction goes. The reasoning is portable: it turns on the breadth of 's.2(19)' and on the proposition that all entities registered under enactments relating to co-operative societies, whatever their nomenclature, are co-operative societies. Practitioners in other States facing the same objection about differently named registrations (mutually aided societies, self-help co-operatives) can run the same argument. Note the limit: the declaration only gets you through the door. Whether the particular income qualifies under sub-section (2) of s.80P is a separate enquiry, which Mavilayi Service Co-operative Bank (SC, 2021) confirms the Assessing Officer may conduct. If it applies to you, the first step is this: Put the registration certificate and the bye-laws on record, and identify the State enactment as one 'for the registration of co-operative societies' within s.2(19).
The first petitioner is a credit co-operative registered under the Karnataka Souharda Sahakari Act, 1997 (Karnataka Act No. 17 of 2000); the second is the Karnataka State Souharda Federal Co-operative Limited. A notice dated 30 March 2018 was issued to the first petitioner. The question framed by the Court was whether an entity registered under the 1997 Act fits the definition of 'co-operative society' in s.2(19) of the Income-tax Act, 1961 for the purpose of s.80P. The Court recorded that the rival submissions were made 'half heartedly' at the Bar. The matter was decided on 2020-01-16 by the High Court (Krishna S. Dixit J). On those facts the High Court held as follows. The petitions succeeded. A declaration was made that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of 'co-operative society' as enacted in s.2(19) of the Income-tax Act, 1961, and that the petitioners are therefore, subject to all just exceptions, entitled to stake their claim for the benefit of s.80P. A writ of certiorari issued quashing the notice dated 30 March 2018 in W.P. No. 48414 of 2018. No costs.
Section 80P is enacted to promote the co-operative movement and must be liberally construed to effectuate that object, the more so since the right to form a co-operative society is a fundamental right under Article 19(1)(c) following the 97th Amendment with effect from 15 October 2013 (para 5(a)). The object of s.80P would be defeated if a restrictive meaning were given to s.2(19), because the availability of s.80P depends on the claimant being a co-operative society; on a purposive construction all entities registered under enactments relating to co-operative societies, whatever their nomenclature, must be treated as co-operative societies (para 5(b)). Karnataka has two such State enactments, the Karnataka Co-operative Societies Act, 1959 and the Karnataka Souharda Sahakari Act, 1997, both traceable to Article 246(3) read with Entry 32 of List II (para 5(c)). The Statement of Objects and Reasons of the 1997 Bill and the preambles of the two Acts show them to be cognate statutes on the same subject matter (paras 5(d) and 5(e)). The word 'co-operative' as defined in s.2(d-2) of the 1959 Act and s.2(e) of the 1997 Act is used as a noun and not an adjective, and s.7 of the 1997 Act makes a registered 'co-operative' a body corporate with perpetual succession despite the absence of the word 'society' as a postfix, just as s.9 of the 1959 Act does. Finally, 'Sahakari' means co-operation, and s.4 of the 1997 Act bars registration unless the main objects are to serve the interest of members in the area of co-operation on principles of self-help and mutual aid. In the words reproduced by the source cited on this page: "going by the text and context of these provisions, one can safely conclude that all entities that are registered under the enactments relating to co-operative societies, regardless of their varying nomenclatures need to be treated as co-operative societies;" The decision followed or applied Ujagar Prints v. Union of India, AIR 1989 SC 516 — relied on for the broad construction of legislative entries (para 5(c)).
It was decided by the High Court on 2020-01-16 and is reported as Writ Petition No. 48414 of 2018 (T-IT) c/w Writ Petition No. 14381 of 2019 (T-IT) (Karnataka High Court, Bengaluru). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 2(19), section 80P, section 80P(1), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The petitions succeeded. A declaration was made that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of 'co-operative society' as enacted in s.2(19) of the Income-tax Act, 1961, and that the petitioners are therefore, subject to all just exceptions, entitled to stake their claim for the benefit of s.80P. A writ of certiorari issued quashing the notice dated 30 March 2018 in W.P. No. 48414 of 2018. No costs. It arises in Co-operative Societies, Deductions & Disallowances and How Tax Law Is Read matters, on section 2(19), section 80P, section 80P(1) of the Income Tax Act 1961, and was decided by Krishna S. Dixit J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Set the preamble and objects of the State enactment against those of the mainstream co-operative societies Act of the same State — the Court's route was to show the two are cognate statutes. Point to the provision of the State Act that makes a registered entity a body corporate with perpetual succession, to answer the argument that the absence of the word 'society' in the name matters. Do not stop at the declaration. Be ready separately on whether the income falls within s.80P(2) and, from assessment year 2018-19, on the s.80AC bar if the return was late.
Validity check could not be completed. Applied by the same judge three weeks later in Karavali Credit Co-operative Society Ltd. v. Commissioner of Income Tax (Appeals), W.P. No. 2844 of 2020, decided 5 February 2020, and in a batch of similar writ petitions of the same date, with liberty reserved to the Revenue to seek revival if the petitioner's version proved untrue. No later treatment, and no special leave petition record, was checked. Nothing in Mavilayi Service Co-operative Bank (SC, 2021) or Kerala State Co-operative Agricultural and Rural Development Bank (SC, 2023) touches s.2(19) registration under a State Souharda enactment; both proceed on the footing that registration under a State law is the gateway and that the enquiry then moves to whether the income falls within s.80P(2). No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment is short and its reasoning is set out as lettered sub-paragraphs (a) to (f) under paragraph 5; there are no other numbered paragraphs after 5 apart from the closing operative order. The printed text carries two sub-paragraphs lettered (e) — the second, beginning 'the word co-operative is defined by sec.2(d-2)', appears to be a printing slip for (f), and what is printed as (f) would then be (g); paragraph locators for those two sub-paragraphs should be treated with care and are not relied on for the quote here, which comes from (b). Reasoning retrieved by asking for the text between 'for the following reasons' and 'In the above circumstances'; the operative order was separately confirmed through /docfragment/. One further point on the report: at paragraph 5(a) the printed text cites the fundamental right to form a co-operative society as being in "Article 19(1)(i)"; the clause amended by the 97th Amendment with effect from 15 October 2013 is in fact Article 19(1)(c), and the entry describes it as 19(1)(c) for that reason. The discrepancy is in the report, not in the proposition. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The petitions succeeded. A declaration was made that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit into the definition of 'co-operative society' as enacted in s.2(19) of the Income-tax Act, 1961, and that the petitioners are therefore, subject to all just exceptions, entitled to stake their claim for the benefit of s.80P. A writ of certiorari issued quashing the notice dated 30 March 2018 in W.P. No. 48414 of 2018. No costs.
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