Case Law Details
Keyyur Primary Agricultural Co-operative Society Ltd. Vs ITO (ITAT Bangalore)
In a recent landmark decision, the Income Tax Appellate Tribunal (ITAT) provided essential clarity on the eligibility of cooperative societies to claim deductions under Section 80P(2)(d) of the Income Tax Act. This ruling emerged from the case titled “Keyyur Primary Agricultural Co-operative Society Ltd. Vs ITO,” heard by the ITAT Bangalore, addressing the assessment years 2017-18 and 2018-19. The central focus of the case was the interest income earned by a cooperative society on investments held with a cooperative bank lacking a license under Section 22 of the Banking Regulation Act, 1949.
Background of the Case: The cooperative society argued that the interest income in question fell outside the definition of the term “Banking Company” as outlined in Section 2(c) of the Banking Regulations Act, 1949. Consequently, the society contended that it should be eligible for a deduction under Section 80P(2)(d) of the Income Tax Act.
Legal Framework and Precedents: The ITAT’s detailed order delved into the legal framework surrounding cooperative societies’ tax implications, emphasizing the importance of understanding the nuances of relevant acts and regulations. The Tribunal particularly highlighted the significance of legal precedents, citing judgments from both the Supreme Court and lower courts to establish a robust legal foundation for its decision.
One critical precedent the ITAT considered was the decision of the Supreme Court in the case of “Mavilayi Service Co-operative Bank Ltd. & Ors. Vs. CIT” (431 ITR 1), where the court held that a cooperative bank must be engaged in the business of banking as defined in the Banking Regulation Act, 1949, to be excluded from the benefit of Section 80P(4) of the Income Tax Act.
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