- 1 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF APRIL, 2026 PRESENT THE HON'BLE MR. JUSTICE S.G.PANDIT AND THE HON'BLE MR. JUSTICE K. V. ARAVIND INCOME TAX APPEAL NO. 444 OF 2016 C/W INCOME TAX APPEAL NO. 442 OF 2016 INCOME TAX APPEAL NO. 446 OF 2016 INCOME TAX APPEAL NO. 447 OF 2016 IN ITA No. 444/2016 BETWEEN: KARNATAKA STATE CO-OPEARTIVE FEDERATION LTD., REP. BY ITS MANAGING DIRECTOR, SRI.SREEDHAR R, NO.32, RACE COURSE ROAD, BANGALORE-560 001 …APPELLANT (BY SRI. A.SHANKAR, SENIOR ADVOCATE FOR SRI. U.A.MADHUSUDHAN, ADVOCATE) AND: 1. THE ASST. DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1), UNITY BUILDING ANNEXE, KALINGA RAO ROAD, Digitally signed by VINUTHA B S Location: High Court of Karnataka - 2 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER BANGALORE - 560027. 2. THE DEPUTY COMMISSIONER OF INCOME TAX (EXEMPTIONS), CIRCLE 1 UNITY BUILDING ANNEXE, KALINGA RAO ROAD BANGALORE - 560027. …RESPONDENTS (BY SRI. E.I.SANMATHI, SENIOR STANDING COUNSEL FOR SRI. SUSHAL TIWARI N, ADVOCATE) THE INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 25/05/2016 PASSED IN ITA NO.1159/BANG/2011 AND ITA NO.1244/BANG/2015 FOR THE ASSESSMENT YEAR 2006-2007, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ETC. IN ITA NO. 442/2016 BETWEEN: 1. KARNATAKA STATE CO-OPEARTIVE FEDERATION LTD., REP. BY ITS MANAGING DIRECTOR, SRI.SREEDHAR.R., NO.32, RACE COURSE ROAD, BANGALORE-560 001. ...APPELLANT (BY SRI. A SHANKAR, SENIOR ADVOCATE FOR SRI. U.A.MADHUSUDHAN, ADVOCATE) AND: 1. THE INCOME TAX OFFICER, WARD-6(1), - 3 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER NOW EXEMPTION CIRCLE-17(1), UNITY BUILDING ANNEXE, P.KALINGA RAO ROAD, BANGALORE - 560027. 2. THE DEPUTY COMMISSIONER OF INCOME TAX, EXEMPTION CIRCLE 17(1), UNITY BUILDING ANNEXE, P.KALINGA RAO ROAD, BANGALORE-560 027. ...RESPONDENTS (BY SRI. E.I.SANMATHI, ADVOCATE) THE INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED 25/05/2016 PASSED IN ITA NO.381/BANG/2014 AND ITA NO.1243/BANG/2015, FOR THE ASSESSMENT YEAR 2005-2006, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ETC. IN ITA NO. 446/2016 BETWEEN: 1. KARNATAKA STATE CO-OPEARTIVE FEDERATION LTD., REP. BY ITS MANAGING DIRECTOR, SRI.SREEDHAR.R., NO.32, RACE COURSE ROAD, BANGALORE-560 001. ...APPELLANT (BY SRI. A.SHANKAR, SENIOR ADVOCATE FOR SRI. U.A.MADHUSUDHAN, ADVOCATE) - 4 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER AND: 1. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1) C.R.BUILDING, QUEENS ROAD, BANGALORE-560 001. PRESENTLY: THE DEPUTY DIRECTOR OF INCOME TAX, (EXEMPTIONS), CIRCLE-17(1), UNITY BUILDING ANNEXE, KALINGA RAO ROAD, BANGALORE-560 002. ...RESPONDENT (BY SRI. E.I.SANMATHI, SENIOR STANDING COUNSEL FOR SRI. N.SUSHAL TIWARI, STANDING COUNSEL) THE INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED25/05/2016 PASSED IN ITA NO.45/BANG/2015, FOR THE ASSESSMENT YEAR 2008-2009, PRAYING THIS HON'BLE COURT TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ETC. IN ITA NO.447/2016 BETWEEN: 1. KARNATAKA STATE CO-OPERATIVE FEDERATION LTD., REP. BY ITS MANAGING DIRECTOR, SRI.SREEDHAR.R., NO.32, RACE COURSE ROAD, BANGALORE-560 001. ...APPELLANT (BY SRI. A.SHANKAR, SENIOR ADVOCATE FOR SRI. U.A.MADHUSUDHAN, ADVOCATE) - 5 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER AND: 1. THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), CIRCLE 17(1) C.R.BUILDING, QUEEN'S ROAD, BANGALORE-560 001. PRESENTLY: THE DEPUTY DIRECTOR OF INCOME TAX (EXEMPTIONS), UNITY BUILDING ANNEXE, KALINGA RAO ROAD BENGALURU - 560 027. ...RESPONDENT (BY SRI. E.I.SANMATHI, SENIOR STANDING COUNSEL FOR SRI. N.SUSHAL TIWARI, STANDING COUNSEL THE INCOME TAX APPEAL IS FILED UNDER SEC.260-A OF INCOME TAX ACT 1961, ARISING OUT OF ORDER DATED: 25/05/2016 PASSED IN ITA NO.46/BANG/2015, FOR THE ASSESSMENT YEAR 2009-2010, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW AS STATED ABOVE AND ANSWER THE SAME IN FAVOUR OF THE APPELLANT AND ETC. THESE APPEALS, COMING ON FOR HEARING, THIS DAY, JUDGMENT WAS DELIVERED THEREIN AS UNDER: CORAM: HON'BLE MR. JUSTICE S.G.PANDIT and HON'BLE MR. JUSTICE K. V. ARAVIND - 6 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER ORAL JUDGMENT (PER: HON'BLE MR. JUSTICE K. V. ARAVIND) These appeals arise from a common order passed by the Tribunal dated 25.05.2016 for the Assessment Years 2005–06, 2006–07, 2008–09, and 2009–10. 2. The facts and dates are referred to as set out in the order of assessment for Assessment Year 2005-06, for the sake of convenience. The appellant–assessee is a co-operative society registered under the Karnataka Co-operative Societies Act, 1959 (for short, “KCS Act”). It filed its return of income on 28.10.2005 declaring NIL income. The assessee claimed exemption under Section 10(23C)(iiiab) of the Income Tax Act, 1961 (for short, “the Act”). 2.1 The return was selected for scrutiny and a notice under Section 143(2) of the Act was issued. The assessment was thereafter completed, denying the assessee’s claim for exemption under Section 10(23C)(iiiab) of the Act. Aggrieved by the same, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals) (for short "CIT - 7 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER (Appeals)"). The CIT (Appeals) allowed the appeal and granted exemption under Section 10(23C)(iiiab) of the Act. 2.2 Assailing the said order passed by the CIT (Appeals), the Revenue preferred an appeal before the Income Tax Appellate Tribunal, “A” Bench, Bangalore (for short, “the Tribunal”). The assessee also preferred an appeal challenging the very same order passed by the CIT (Appeals). 2.3 In its appeal, the assessee raised grounds regarding the non-taxability of certain amounts received from a co-operative society under Section 57(2A) of the KCS Act. The Tribunal allowed the Revenue’s appeal insofar as it pertained to the claim for exemption under Section 10(23C)(iiiab) of the Act, holding in favour of the Revenue. 2.4 Insofar as the additional ground relating to Section 57(2A) of the KCS Act is concerned, the Tribunal remitted the matter to the CIT (Appeals) for adjudication of the said issue. Aggrieved thereby, the appellant–assessee is in appeal, raising the following substantial questions of law: - 8 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER In ITA.Nos.442/2016 & 444/2016 (i) Whether the Tribunal is justified in law in holding that the appellant is not entitled to exemption u/s 10(23C)(iiiab) of the Act on the facts and circumstances of the case? (ii) Whether the Tribunal erred in law in coming to a conclusion that the appellant is neither an educational institution existing solely for educational purposes and not for profit; nor wholly or substantially financed by the government, which is contrary to material and evidence on record and consequently passed a perverse order on the facts and circumstances of the case? (iii) Whether the Tribunal is justified in law in not condoning the delay in filing of appeal before the Tribunal by the appellant even though there was sufficient and bonafide cause for such delay and consequently passed a perverse order on the facts and circumstances of the case? (iv) Whether the Tribunal is justified in law in not holding that the assessment order framed in the case of the appellant in the wrong status of 'Co-operative Society' as against the correct status of 'Artificial Juridical Person' renders the assessment order void ab initio and further erred in not quashing the assessment order on the facts and circumstances of the case? - 9 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER In ITA.Nos.446/2016 & 447/2016: (i) Whether the Tribunal is justified in law in holding that the appellant is not entitled to exemption u/s 10(23C)(iiiab) of the Act on the facts and circumstances of the case? (ii) Whether the Tribunal erred in law in coming to a conclusion that the appellant is neither an educational institution existing solely for educational purposes and not for profit; nor wholly or substantially financed by the government, which is contrary to material and evidence on record and consequently passed a perverse order on the facts and circumstances of the case? (iii) Whether the Tribunal is justified in law in not holding that the assessment order framed in the case of the appellant in the wrong status of 'Co-operative Society' as against the correct status of 'Artificial Juridical Person' renders the assessment order void ab initio and further erred in not quashing the assessment order on the facts and circumstances of the case? 2.5 The assessee, by way of a memo dated 25.11.2025, has also raised two additional substantial questions of law. The same reads as under: (i) Whether the Tribunal is justified not adjudicating the ground with respect to whether the contribution from co-operative societies to the co- - 10 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER operative education fund under section 57(2A) of the Co-operative Societies Act is the income of the appellant, when the details necessary for the adjudication for the same were available with the Tribunal? (ii) Whether the Tribunal is justified in not adjudicating the ground with respect to whether the contribution from co-operative societies to the co-operative education fund under section 57(2A) of the Co-operative Societies Act stood diverted at source and consequently the same is not the income of the appellant when the details necessary for the adjudication for the same were available with the Tribunal? 3. Sri. A. Shankar, learned Senior Counsel appearing for the appellant–assessee, submits that in view of Section 57(2A) of the KCS Act, the contributions made by co-operative societies are by statutory mandate and are required to be utilized for the purposes contemplated thereunder. Learned Senior Counsel further submits that the co-operative education fund is required to be applied in the manner provided under Section 57A of the KCS Act. - 11 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER 3.1 Learned Senior Counsel also submits that the Tribunal, in the assessee’s own case in ITA.Nos.864 to 866/Bang/2019, by order dated 03.11.2020 for the Assessment Years 2013–14 to 2015–16, has held that, in view of Sections 57(2A) and 57A of the KCS Act, such donations/contributions are not taxable. However, he fairly submits that the Tribunal had remitted the matter to the Assessing Officer for examination of the said issues. 3.2 It is further submitted that if the additional questions of law now raised are considered, the substantial questions of law framed in the appeal memo may not require adjudication. 4. Per contra, Sri. E. I. Sanmathi, learned Senior Standing Counsel appearing on behalf of Sri Sushal Tiwari N. for the respondents, submits that the assessee had not made any claim for deduction under Section 57(2A) of the KCS Act. It is contended that fresh claims are not permissible after completion of the assessment, particularly before the Tribunal. 4.1 Learned Senior Standing Counsel further submits that Section 57A of the KCS Act, as referred to by the Tribunal in - 12 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER the relied upon order dated 03.11.2020, has no application to the present cases. It is submitted that Section 57A of the KCS Act was inserted with effect from 11.02.2013. 5. Having considered the submissions made by the learned Senior Counsel for the appellant and the learned Senior Standing Counsel for the respondents, we notice that the Tribunal has entertained the additional grounds with respect to Section 57(2A) of the KCS Act and has directed the CIT (Appeals) to adjudicate the said grounds. The applicability of Section 57(2A) of the KCS Act was raised for the first time before the Tribunal. 6. In the absence of foundational facts, the Tribunal was justified in remitting the matter to the CIT (Appeals). Before the CIT (Appeals), both the assessee and the Assessing Officer would have the opportunity to put forth their respective cases. 7. In view of the fact that the impugned order is one of remand, and in light of the fresh ground/claim raised for the first time before the Tribunal, we do not find any error in the order of remand passed by the Tribunal. - 13 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER 8. Sri. A. Shankar, learned Senior Counsel appearing for the appellant, submits that the order of remand is dated 25.05.2016 and that, till date, the CIT (Appeals) has not passed any order pursuant to the remand. 9. We find that the order of remand does not warrant interference by this Court. However, it is evident that the said order of remand has not been given effect to for more than ten years. Though no specific period of limitation is prescribed for passing an order on remand by the CIT (Appeals), such an order ought to be passed within a reasonable time. We are of the considered view that a delay of ten years in giving effect to the order of the Tribunal cannot be regarded as reasonable. 10. In view of the aforesaid circumstances, we direct the CIT (Appeals) to pass orders in terms of the remand made by the Tribunal in its order dated 25.05.2016, within a period of four months from the date of production of a copy of this order. The Assessing Officer shall ensure that a copy of this order is placed before the Commissioner (Appeals) having jurisdiction to deal with the present appeals. - 14 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER 11. The aforesaid direction is necessitated in light of the submission made by both the learned counsel that the proceedings before the CIT (Appeals) are presently conducted in a faceless environment. 12. The assessee filed ITA Nos. 1243/Bang/2015, 1244/Bang/2015, 45/Bang/2015, and 46/Bang/2015 along with applications for condonation of delay. The Tribunal recorded a finding that no satisfactory explanation had been made out for condonation of the delay. However, we notice that, in the immediately succeeding paragraph, the Tribunal has entertained the additional grounds raised in the assessee’s appeals and has directed the CIT (Appeals) to adjudicate the said grounds. 13. In light of the order of remand and having regard to the fact that the very same issues arise in multiple assessment years, we deem it appropriate to condone the delay in filing the aforesaid appeals before the Tribunal. Accordingly, the delay in filing the said appeals by the assessee before the Tribunal stands condoned. - 15 - HC-KAR NC: 2026:KHC:20814-DB ITA No. 444 of 2016 C/W ITA No. 442 of 2016 ITA No. 446 of 2016 AND 1 OTHER 14. In light of the above order, the substantial questions of law, as admitted, are left unanswered. The appeals are disposed of accordingly. All contentions are kept open. Sd/- (S.G.PANDIT) JUDGE Sd/- (K. V. ARAVIND) JUDGE SMJ List No.: 1 Sl No.: 14