It is seen that that when a cooperative society places deposits in a co-operative bank the Assessing Officers are denying the benefit of Section 8OP on the interest earned on such deposits. The denial is based on the erroneous application of a judgement that has held that a co-operative bank is not entitled to the benefit of Section 80P. This may be set right by a clarificatory amendment.

Further, the intent of legislation is clearly to allow the deduction to any co-operative society which earns interest from deposits with a co-operative bank. However, the definition of co-operative Society as given in section 2(19) of the Act refers to Co-operative Society registered under the Cooperative Societies Act 1912 and societies registered under the State Co-operative Societies Act.

Since this definition does not refer to Societies registered under the Central Act, under which numerous Multi-state Cooperative Banks are registered, the interest earned by a cooperative society from a deposit with a Multi-state Co-operative Bank is therefore technically not eligible for deduction of the interest earned on such deposit.

This leads to an anomalous situation ‘that a cooperative society keeping a bank deposit with a State level Co-operative Bank gets such interest as nontaxable but if the same cooperative society keeps the deposit with a Multi-state Co-op Bank, then such interest is taxed. It is submitted that this is not the intent of the legislation.


The anomalous position may be rectified by making suitable amendment in section 2(19) defining a Co-operative Society, by including therein a society registered under the Central Act currently applicable.

Source-  ICAI Pre-Budget Memorandum–2018 (Direct Taxes and International Tax

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Category : Income Tax (26530)
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Tags : Budget (1936) ICAI (2519) Section 80P (46)

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