M/s Karnataka State Co-operative Federation Limited , Bangalore vs. Assistant Commissioner of Income Tax Circle-1(2)(1), Bangalore

IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCHES “ A ” BENCH: BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER

ITA Nos.864 to 866/Bang/2019
(Assessment Years : 2013-14 to 2015-16)

M/s. Karnataka State Co-operative Federation Limited,23/3, Crescent Road, Shivananda Circle,Bangalore-560 001,
PANAAAJK 0471H
Appellant

Vs.

Assistant Commissioner of Income Tax,Circle 1(2)(1), Bangalore. 
Respondent.

Assessee By:Shri S. Ramasubramanyam, C.A.
Revenue By:Shri Sumer Singh, Addl. CIT (D.R)

Date of Hearing : 02.11.2020.
Date of Pronouncement : 03.11. 2020.

O R D E R

PER SHRI CHANDRA POOJARI, A.M :

These three appeals filed by the assessee are directed against different orders of Commissioner of Income Tax (Appeals)-1, Bangalore for the Assessment Years 2013-14, 2014-15 & 2015-16. The issues in these appeals are identical and common, they are heard together and passed consolidated order for the sake of convenience.

2. The first ground in these appeals are with regard to confirming the action of the Assessing Officer by the CIT (Appeals) in treating the contribution received towards co-operative education fund as income of the assessee without considering the statutory requirement by misunderstanding the meaning of the words “objects” and “activities”.

3. The facts of the case are that the assessee is Federation for al co-operative societies formed and registered under Karnataka Co-operative Societies Act, 1959. The members of the assessee are co-operative societies in the State of Karnataka. Its main object is to impart education and training to the members, potential members, Directors and office bearers of the co-operative societies and members of general public. The Assessing Officer while completing the assessment treated the contribution received at Rs.11,39,69,052; Rs.13,25,27,459 and Rs.16,57,07,934 for the Assessment Years 2013-14, 2014-15 & 2015-16 respectively towards co-operative education fund as income of the assessee. The assessee made plea before the CIT (Appeals) that the said amount was collected from various co-operative societies towards education and training as per the requirement of provisions of Karnataka Co-operative Societies Act, 1959. The utilization of the said amount is defined in the said provisions of the Act and prior approval of Advisory Board constituted for the purpose as prescribed. The assessee does not have any right or power over the funds and it is required to spend the amount only as provided in the statute. It has to be utilized as directed by the Advisory Board for the purpose of imparting education to the members, directors and members of co-operative societies and general public and training to the employees of the co-operative societies. The assessee shall utilize such funds for the activities of Federation for the purpose specified. It was collected by the assessee only because of its statutory requirement and therefore amount collected for co-operative education fund was not considered as income of the assessee. However, this argument of the assessee was rejected by the lower authorities. Aggrieved by the assessee, the assessee is in appeal before us.

4. The learned Authorised Representative submitted that as per the Section 57(2A) of Co-operative Societies Act, every co-operative society shall contribute 2% of the Karnataka Co-operative Societies Act specifies the manner in which the education fund should be applied by the Federation. He drew our attention to the said provisions of the Act. He also drew our attention the Rule 20 of the Karnataka Co-operative Societies Act, 1959 regarding how the education fund should be administered and how the fund should be utilized. According to the learned Authorised Representative, the assessee has no control over the fund and it has to be utilized as per the above rule and it should be only for specified purpose and as such it should be considered as it is diverted at source by over riding title. He relied on judgements of Hon'ble Supreme Court in the case of CIT Vs. Sitaldas Tirathdas 41 ITR 367 and judgment of Hon'ble Karnataka High Court in the case of CIT Vs. Karnataka Urban Infrastructure Development and Finance Corporation (KUIDFC) 284 ITR 582; CIT Vs. Karnataka State Agricultural Produces Processing and Export Corporation Ltd. 377 ITR 496; CIT Vs. Pandavapura Sahakara Sakkare Kharkane Ltd. 198 ITR 690. He relied on the judgement of Hon'ble Supreme Court in the case of CIT Vs. Bijli Cotton Mills (P) Ltd. 116 ITR 60. Further he submitted that it cannot be treated as income in the hands of the assessee as it is received by the as with an obligation to spend as per Section 57A of the Co-operative Societies Act. For the purpose, he relied on the decision of Hon'ble Supreme Court in the case of Emil Webber Vs. CIT 200 ITR 483 (SC).

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