Case Law Details
Kerala State Co-Operative Agricultural And Rural Development Bank Ltd. Vs Assessing Officer (Supreme Court of India)
In a significant legal ruling, the Supreme Court of India has addressed the eligibility of cooperative societies for deductions under Section 80P of the Income Tax Act based on their banking activities. The case in question involved the Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. and the Assessing Officer. The court’s judgment sheds light on the distinction between cooperative banks and cooperative credit societies and their entitlement to tax deductions.
Definition of Cooperative Banks: The Supreme Court has clarified that for a cooperative society to qualify as a cooperative bank and, therefore, fall under the purview of Section 80P(4) of the Income Tax Act, it must conduct banking business as defined in Section 5(b) of the Banking Regulation Act, 1949 (BR Act). Only entities meeting this criterion would be categorized as cooperative banks.
Eligibility for Tax Deductions: According to the court’s ruling, cooperative societies that do not meet the criteria for being considered cooperative banks, as per Section 56 of the BR Act, are entitled to deductions under Section 80P of the Income Tax Act. This provision grants tax benefits to cooperative societies that provide credit facilities to their members.
Clear Distinction: The judgment emphasizes that Section 80P(2) of the Income Tax Act makes a clear distinction between the business of banking and providing credit facilities by cooperative societies. Entities conducting ‘banking business’ as defined in the BR Act are categorized as cooperative banks, while those offering credit facilities are considered cooperative credit societies.
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