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Kerala State Co-operative Agricultural and Rural Development Bank Ltd. Vs. The Assessing Officer, Trivandrum and Ors. - (Supreme Court) (14 Sep 2023)

Apex co-operative society providing financial accommodation to its members entitled to benefit of deduction under Section 80P of the IT Act


Direct Taxation

Present appeals arise out of analogous proceedings against the Appellant/Assessee, and, impugn the judgment passed by the Kerala High Court; the order passed by the Commissioner of Income Tax (Appeals)and the order passed by the Income Tax Appellate Tribunal ('ITAT').

The issue involved in present cases is, whether, the Appellant/Assessee, a co-operative society, is entitled to claim deduction of the whole of its profits and gains of business attributable to the business of banking or providing credit facilities to its members who are all co-operative societies under Section 80P of the Income Tax Act, 1961.

The Appellant is not a co-operative bank within the meaning of Sub-section (4) of Section 80P of the Act. The Appellant is a co-operative credit society under Section 80P(2)(a)(i) of the Act whose primary object is to provide financial accommodation to its members who are all other co-operative societies and not members of the public.

Therefore, when the definition of "co-operative bank" in Section 56 of Banking Regulation Act, 1949 is viewed in terms of Sections 2(u) of the NABARD Act, 1981, it is clear that only a state co-operative bank would be within the scope and meaning of a banking company Under Section 2(c) of the BR Act, 1949 on obtaining licence under Section 22 of the said Act.

In the instant case, although the Appellant society is an apex co-operative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949. The orders of the Kerala High Court and other authorities are set aside. Consequently, the Appellant is entitled to the benefit of deduction Under Section 80P of the Act. Appeal allowed.


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