TaxTMI 
TaxTMI 
2023 (9) TMI 761
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.... A.S.G. Mrs. Sonia Mathur, Sr. Adv. Mr. Raj Bahadur Yadav, AOR Mr. S A Haseeb, Adv. Mrs. Praveena Gautam, Adv. Mr. H R Rao, Adv. Mrs. Nisha Bagchi, Adv. JUDGMENT NAGARATHNA , J. Leave granted in those Special Leave Petitions where it has not yet been granted. 2. These appeals arise out of analogous proceedings against the appellant/assessee, and, inter alia, impugn the judgement dated 26.11.2015 passed by the Kerala High Court; the order dated 08.08.2016 passed by the Commissioner of Income Tax (Appeals), Trivandrum and the order dated 07.02.2019 passed by the Income Tax Appellate Tribunal ('ITAT'). 3. The issue involved in these 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 (hereinafter referred to as "the Act", for the sake of brevity). Since the question of law involved in these proceedings are common, the facts only in SLP(C) No(s). 2737 of 2016 impugning the judgement of the High Court of Kerala da....
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..... It would also be apposite to take note of the Kerala State Co- Operative Agricultural Development Banks Act, 1984 (for short, "State Act, 1984"). This Act was passed 'to facilitate the more efficient working of Co-operative "Agricultural and Rural Development Banks" in the State of Kerala.' 8. Section 2(a) of the State Act, 1984 defines "Agricultural and Rural Development Bank" to mean "the Kerala Co-operative Central Land Mortgage Bank Limited, registered under Section 10 of the State Act, 1951 (X of 1952), and provides that the same shall be known as the "Kerala State Co-operative Agricultural and Rural Development Bank Limited" which is the name of the appellant herein. Section 2(d) thereof defines "co-operative society" to mean a co-operative society registered or deemed to be registered under the State Act, 1969 (21 of 1969). It is apposite to note that Section 2(iA) of the said Act defines "Rural Development" to mean any activity intended to promote the development in rural area and includes the following developmental activities: i) Development of handicrafts and other crafts; ii) Small Industries; iii) Cottage and Village Industries; iv) Industries in tiny and decentra....
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....her observed that with the insertion of Section 80P (4), co-operative banks are placed at par with other commercial banks and the appellant/assessee who is in the business of banking through its primary co-operative banks is definitely a co-operative bank within the meaning of Section 80P (4). Consequently, the appeal was dismissed. 9.3. Being aggrieved by the Order passed by CIT(A), the appellant/assessee filed further appeal before the Income Tax Appellate Tribunal ("ITAT"). The ITAT vide Order dated 23.02.2011 partly allowed the appeal and held that the appellant/assessee is a co-operative bank and is not a primary agricultural credit society or a primary co-operative agricultural and rural development bank and is consequently hit by the provision of Section 80P (4), thus, the deduction claimed was rightly denied. However, the ITAT also clarified to the extent that the appellant/assessee is acting as a State Land Development Bank which falls within the purview of the National Bank for Agriculture and Rural Development Act, 1981 ("NABARD Act, 1981", for short) and is exigible for financial assistance from NABARD. Therefore, the appellant/assessee's claim merits acceptance and ....
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....1951 was repealed by Section 110 of the State Act, 1969. Section 2(g) of the State Act, 1969 defines a co-operative society with limited liability. That on the enactment of the State Act, 1984, Section 2(a) thereof defines "agricultural and rural development bank" to mean the Kerala Co-operative Central Land Mortgage Bank Limited, registered under Section 10 of the State Act, 1951 which is known as "Kerala State Co-operative Agricultural and Rural Development Bank Limited". Therefore, the appellant is not a co-operative bank within the meaning of Section 80P of the Act. 10.3. Referring to Explanation (a) to sub-section (4) of Section 80P of the Act which states that a co-operative bank shall have the same meaning assigned to it in Part V of the Banking Regulation Act, 1949 (hereinafter referred to as "BR Act, 1949", for the sake of convenience), Part V of the BR Act, 1949 which applies to co-operative banks was adverted to. That Section 56 in Part V of the said Act begins with a nonobstante clause and it states that notwithstanding anything contained in any other law for the time being in force, the provisions of the BR Act, 1949 shall apply to, or in relation to, co-operative s....
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....ning of Section 80P(2)(a)(i) of the Act. That only a co-operative society which is engaged in the business of banking and is a co-operative bank within the meaning of Part V of the BR Act, 1949 would come within the scope of the exclusion under sub-section (4) of Section 80P of the Act. 10.5. In this context, our attention was drawn to Section 56(o) of the BR Act, 1949 which states that under Section 22, no co-operative society shall carry out banking business in India unless it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank. That in the instant case, the appellant does not hold any licence as per Section 22 of the BR Act, 1949 and in fact such a licence is not required for the appellant to conduct its business as the appellant is not conducting banking business within the meaning of BR Act, 1949. Therefore, the appellant bank does not come under the provisions of Chapter V of the BR Act, 1949. It was submitted that the Reserve Bank of India reports and the RTI replies categorically indicate that the appellant is not included under the scope of the provisions of the RBI Act. 10.6. In this regard, learned senior counsel, Sri Krishnan Venug....
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....ly to the appellant herein. In this regard, learned ASG submitted that any central or state cooperative bank is a co-operative bank within the meaning of Section 56 of BR Act, 1949 as it is engaged in banking business. That the appellant is a state co-operative bank. Therefore, sub-section (4) of Section 80P excludes the benefit of deduction in respect of income to such an entity. It was submitted that impugned orders are just and proper and do not call for any interference in these appeals which lack merit and therefore the same may be dismissed. 10.9. By way of reply, learned senior counsel for the appellants reiterated that the appellant is not engaged in banking business at all and it receives funds from National Bank for Agriculture and Rural Development and in turn lends money to its member societies and in that sense is an apex bank. Reliance was placed on Section 2(d) of NABARD Act, 1981 to contend that a central co-operative bank is a principal co-operative society in a district in a state, the primary object of which is the financing of other co-operative societies in that district. The appellant is definitely not a central co-operative bank. That the appellant is also....
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....I Act, 2002"). It was contended that the Kerala State Co-operative Bank is a state co-operative bank which is an apex bank. That a state cooperative bank, central co-operative bank in the co-operative sector is engaged in the business of banking but the appellant herein is not engaged in the business of banking within the meaning of BR Act, 1949 and is thus entitled to the benefit of deduction even as per sub-section (4) of Section 80P of the Act as it is not a co-operative bank. 10.12. In this regard, our attention was drawn to the provisions of State Act, 1969, namely, Section 2(rb) which defines a "state cooperative bank"; Section 2(ia) which defines a "district co-operative bank"; Section 2(ra) which defines a state co-operative agricultural and rural development bank and Section 2(oc) which defines a primary cooperative agricultural and rural development bank. 10.13. It was further submitted that the appellant herein is Kerala State Co-operative Agricultural and Rural Development Bank which is as defined in Section 2(ra) of the State Act, 1969 and which is an apex bank having only primary co-operative agricultural and rural development banks as its members as defined und....
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....ithout the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment In connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities ; Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government' (b) in the case of co-operative society, being a primary society engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to - (i) a federal co-operat....
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....80HHB or section 80HHC, or section 80HHD or section 80- 1 or section 80-IA or section 80J, or section 80JJ, the deduction under subsection (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of subsection (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80HH, section 80HHA, section 80HHB, section 80HHC, section 80HHD, section 80- 1, section 80-IA, section 80J and 80JJ. [(4) The provisions of this section shall not apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Explanation.- For the purposes of this sub-section,- (a) "co-operative bank" and "primary agricultural credit society" shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) "primary co-operative agricultural and rural development bank" means a society having its area of operation confined to a taluk and the principal object of which is to provide for long....
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....a notice as aforesaid to a banking company in existence on the commencement of this Act before the expiry of the three years referred to in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow. (3) Before granting any licence under this section, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the following conditions are fulfilled, namely:- (a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue; (b) that the affairs of the company are not being, or are not likely to be, conducted in a manner deterimental to the interests of its present or future depositors; (c) that the general character of the proposed management of the company will not be prejudicial to the public interest or the interest of its depositors; (d) that the company has adequate capital structure and earning prospects; (e) that the public interest will be served by the grant of a licence to the company to carry on banking business in India; (f) that having regard to....
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.... such decision is communicated to it, appeal to the Central Government. (6) The decision of the Central Government where an appeal has been preferred to it under sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final. X X X 56. Act to apply to co-operative societies subject to modifications.-The provisions of this Act, as in force for the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely:- (a) throughout this Act, unless the context otherwise requires,- (i) references to a "banking company" or "the company" or "such company" shall be construed as references to a co-operative bank, (ii) references to "commencement of this Act" shall be construed as references to commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); (b) in section 2, the words and figures "the Companies Act, 1956 (1 of 1956), and" shall be omitted; (c) in section 5- (i) after clause (cc), the following clauses shall be inserted namely:- ....
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....ause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose; (ccvi)"primary credit society" means a co-operative society, other than a primary agricultural credit society,- (1) the primary object or principal business of which is the transaction of banking business; (2) the paid-up share capital and reserves of which are less than one lakh of rupees; and (3) the bye-laws of which do not permit admission of any other co-operative society as a member: Provided that this sub-clause shall not apply to the admission of a co-operative bank as a member by reason of such co-operative bank subscribing to the share capital of such co-operative society out of funds provided by the State Government for the purpose. Explanation.-If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses (cciv), (ccv) and (ccvi), a determination thereof by the Reserve Bank shall be final; (ccvii) "central co-operative bank", "pri....
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....to prohibit- (i) a co-operative society carrying on business as a co-operative bank at the commencement of the Banking Law (Application to Co-operative Societies) Act, 1965 (23 of 1965); or (ii) a co-operative bank which has come into existence as a result of the division of any other co-operative society carrying on business as a co-operative bank, or the amalgamation of two or more co-operative societies carrying on banking business at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) or at any time thereafter; or (iii) [***] from carrying on banking business until it is granted a licence in pursuance of this section or is, by a notice in writing notified by the Reserve Bank that the licence cannot be granted to it.]; (ii) sub-section (3A) shall be omitted; (iii) in sub-section (4) in clause (iii) the words, brackets, figures and letter "and sub-section (3A)" shall be omitted; iii) National Bank for Agriculture and Rural Development Act, 1981 ('NABARD Act, 1981', for short): The relevant provisions of NABARD Act, 1981 are extracted as under for immediate refer....
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....ng Regulation Act, 1949." iv) The Reserve Bank of India Act, 1934 (RBI Act): The relevant provisions of the RBI Act are extracted as under for immediate reference: "2.Definitions.- In this Act, unless there is anything repugnant in the subject or context,- X X X (e) "scheduled bank" means a bank included in the Second Schedule;" v) The Kerala Co-Operative Societies Act, 1969 (State Act, 1969): The relevant provisions of the State Act, 1969 are extracted as under for immediate reference: "2. Definitions.- In this Act, unless the context otherwise requires- X X X (g) "co-operative society with limited liability" means a society in which the liability of its members for the debts of the society in the event of its being wound up is limited by its bye-laws- (i) to the amount, if any, unpaid on the shares respectively held by them; or (ii) to such amount as they may, respectively, undertake to contribute to the assets of the society; X X X (ia) District Co-operative Bank" means a Central Society having jurisdiction over one revenue district and having as its memb....
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....) any society existing in the State on the date of the commencement of this Act which has been registered or deemed to be registered under any of the aforesaid repealed Acts shall be deemed to be registered under this Act, and the bye-laws of such society shall, so far as they are not inconsistent with the provisions of this Act, continue in force until altered or rescinded." vi) The Kerala State Co-Operative Agricultural Development Banks Act, 1984 (State Act, 1984): The relevant provisions of the State Act, 1984 are extracted as under for immediate reference: "(2) Definitions.- In this Act, unless the context otherwise requires,- (a) "Agricultural and Rural Development Bank" means the Kerala Co-operative Central Land Mortgage Bank Limited, registered under section 10 of the Travancore-Cochin Co-operative Societies Act, 1951 (X of 1952), which shall hereafter be known as the "Kerala State Co-operative Agricultural and Rural Development Bank Limited"; X X X (ka) "Kerala State Co-operative Bank" means an apex society having Primary Agricultural Credit Societies and Urban Co-operative Banks as its members including nominal or asso....
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....urt on considering Section 56 of the BR Act, 1949 along with Section 22 thereof, observed that the Reserve Bank of India has the right to issue licences to companies to carry out banking business and no company can carry on a banking business unless it holds a licence issued by the Reserve Bank of India. After the amendment to Section 22 of the said Act, certain types of co-operative societies, as were brought within the purview of the BR Act, 1949, could be issued a licence by the Reserve Bank of India. Under Section 22, the term "co-operative society" would include all types of co-operative societies. This Court observed that in other words, no co-operative society can carry on banking business unless it falls within the permitted categories set out in Section 22. The term "co-operative bank" has been defined under Section 5(cci) as a state co-operative bank, a central co-operative bank and a primary co-operative bank. Thus, the term "co-operative bank" does not include all co-operative societies. It only includes the abovementioned three types of societies which function as banks. By virtue of Section 5(ccvii), the term state co-operative bank is to be understood as defined in N....
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....State. In the context of the appellant therein, it was observed that the said entity had not registered under the Co-operative Societies Act, 1912. The question thus was, whether, the appellant therein was a society registered under any other law relating to co-operative societies for the time being in force in any State which would include all laws relating to co-operative societies which are in force in any State. While interpreting Section 2(f) of the NABARD Act, 1981 which defines co-operative society, this Court held that it is only co-operative societies registered under local or State laws relating to co-operative societies which would be covered under the said definition. If it is a state co-operative bank, then there would be a declaration only by the State Government. If a declaration is by the State Government, it must be in respect of a society which is registered in that State and which can be regulated by the Registrar of Co-operative Societies of that State. It was concluded that the words "in any State" in Section 2(f) of NABARD Act, 1981 would mean that the co-operative society must be registered under the law in force in any State in which it wants to operate. It ....
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....ence, a direction was issued to the Reserve Bank of India to forthwith revoke the banking licence granted to the appellants therein. d) In A.P. Varghese, while considering Section 56 of the BR Act, 1949 in the context of co-operative bank which has been defined to mean a state co-operative bank, a central co-operative bank and a primary cooperative bank which have been assigned the definitions under NABARD Act, 1981 and while considering the definitions of clause (u) and (d) in Section 2 of NABARD Act, 1981, it was observed, inter alia, that a state co-operative bank is one defined in Section 2(rb) of the State Act, 1969 to mean an apex society having only district co-operative banks as its members. District co-operative bank as defined in clause (ia) of Section 2 of the said Act, is a central society, the principal object of which is to raise funds to be lent to its members, with jurisdiction over one revenue district and having as its members any type of primary societies and federal and central societies having headquarters in such district. Therefore, Kerala State Co-operative Bank is a "state co-operative bank" as defined in the NABARD Act, 1981 and the district co-opera....
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....unal, had approached this Court. On considering the rival submissions, this Court observed that sub-clause (1) of clause (a) of sub-section (2) of Section 80P recognises two kinds of co-operative societies, namely, (i) those carrying on the business of banking and; (ii) those providing credit facilities to its members. In this regard, reliance was placed on Kerala State Coop. Mktg. Federation Ltd. vs. CIT, (1998) 5 SCC 48. Also, reference was made to CIT vs. Punjab State Coop. Bank Ltd., (2008) 300 ITR 24 which is a judgment of the Punjab and Haryana High Court and it was observed that Section 80P of the Act is a benevolent provision which is enacted by Parliament in order to encourage and promote growth of cooperative sector in the economic life of the country. Therefore, such a provision has to be read liberally, reasonably and in favour of the assessee with a view to effectuate the object of the Legislature and not to defeat it. Therefore, all those co-operative societies which fall within the purview of the Section 80P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Clause (a) of sub-section (2) gives exemption of whole o....
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....ment year 2007-2008. However, with the introduction of Section 80P(4) of the Act, the Assessing Officer denied their claims for deduction, relying upon the said provision. The Full Bench of the Kerala High Court ultimately held that if the assessee-societies ceased to be specific class of society for which deduction is provided, by reason of sub-section (4) of Section 80P of the Act the deduction could not be allowed. The Full Bench of the Kerala High Court accordingly answered the question. Being aggrieved, the assessees approached this Court. It was argued before this Court by the assessees that co-operative societies which are registered under the said Act are entitled to deductions under Section 80P. That the insertion of sub-section (4) to Section 80P of the Act had not led to any change insofar as the assessees therein were concerned. That the moment a cooperative society is registered under the said Act, whatever be its classification, so long as it provides credit facilities to its members, it is entitled to a deduction contained in Section 80P(2)(a)(i) of the Act. A distinction was said to be drawn between eligibility for deduction, and whether the whole of the amounts ....
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....ow that the question of law that was reflected in para 5 of the judgment was answered in favour of the assessee. The following propositions may be culled out from the judgment in Citizen Coop. Society case: 24.1. That Section 80-P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the cooperative sector generally in the economic life of the country and must, therefore, be read liberally and in favour of the assessee; 24.2. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub-section (2) of Section 80-P must be given by way of deduction; 24.3. That this Court in Kerala State Coop. Mktg. Federation Ltd. has construed Section 80-P widely and liberally, holding that if a society were to avail of several heads of deduction, and if it fell within any one head of deduction, it would be free from tax notwithstanding that the conditions of another head of deduction are not satisfied; 24.4. This is for the reason that when the legislature wanted to restrict the ded....
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.... Income Tax Act, 1961. *** 2. In this regard, I have been directed to state that sub-section (4) of Section 80-P provides that deduction under the said section shall not be allowable to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. For the purpose of the said sub-section, cooperative bank shall have the meaning assigned to it in Part V of the Banking Regulation Act, 1949. 3. In Part V of the Banking Regulation Act, "Cooperative Bank" means a State Cooperative bank, a Central Cooperative Bank and a primary cooperative bank. 4. Thus, if the Delhi Co-op Urban T & C Society Ltd. does not fall within the meaning of "Cooperative Bank" as defined in Part V of the Banking Regulation Act, 1949, sub-section (4) of Section 80-P will not apply in this case. 5. Issued with the approval of Chairman, Central Board of Direct Taxes." 42. The above material would clearly indicate that the limited object of Section 80-P(4) is to exclude cooperative banks that function on a par with other commercial banks i.e. which lend money to members of the public. Thus, i....
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....rd "agriculture" into Section 80P(2)(a)(i) when it is not there. Further, sub-section (4) of Section 80P had to be read as a proviso, which specifically excludes cooperative banks which are co-operative societies engaged in banking business i.e., engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India. Therefore, the benefit of deduction was extended to the assessee in the said case notwithstanding that they may also be giving loans to the members which are not related to agriculture. Also, in case it was found that there are instances of loans being given to non-members, profits attributable to such loans obviously cannot be deducted. Analysis: 14. We shall now analyse the aforesaid judgments in a common conspectus. 14.1. In Apex Co-operative Bank of Urban Bank of Maharashtra and Goa Ltd., it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state co-operative bank, central co-operative bank and primary co51 operative bank which are covered under Section 56 (cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. Thus, it is on....
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....s (1) and (2) of Section 80P. The proviso excludes co-operative banks, which are co-operative societies which must possess a licence from the Reserve Bank of India to do banking business. In other words, if an entity does not require a licence to do banking business within the definition of banking under Section5(b) of the BR Act, 1949, then it would not fall within the scope of sub-section (4) of Section 80P. 14.3. While analysing Section 80P of the Act in depth, the following points were noted by this Court: i) Firstly, the marginal note to Section 80P which reads "Deduction in respect of income of co-operative societies" is significant as it indicates the general "drift" of the provision. ii) Secondly, for purposes of eligibility for deduction, the assessee must be a "co-operative society". iii) Thirdly, the gross total income must include income that is referred to in sub-section (2). iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being "engaged in", inter alia, carrying on the business of banking or providing credit facilities to its members. v) Fifthly, the burden is on the assessee to show, by adducing fact....
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....to its members for agricultural purposes or for purposes connected with agricultural activities. 14.5. It was further observed in the said case that some primary agricultural credit societies had sought for banking licence from Reserve Bank of India but the same was turned down by observing that such a society was not carrying on the business of banking and that it did not come under the purview of Reserve Bank of India requiring a licence for its business. 14.6. Thereafter in paragraph 48 of the judgment, it was observed that a deduction that is given without any reference to any restriction or limitation cannot be restricted or limited by implication. That subsection (4) of Section 80P which is in the nature of a proviso specifically excludes co-operative banks which are co-operative societies engaged in banking business i.e. engaged in lending money to members of the public, which have a licence in this behalf from Reserve Bank of India. 15. It is on the aforesaid touchstone that these appeals must now be further considered from the point of view of the applicable provisions of law. 15.1. Section 80P speaks about deduction in respect of income of cooperative societie....
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....tates that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act shall apply to, or in relation to, co-operative societies as they apply to, or in relation to banking companies subject to the following modifications, namely, * in clause (a) throughout the said Act, unless the context otherwise requires,- (i) references to a "banking company" or "the company" or "such company" shall be construed as references to a cooperative bank. * in clause (c), it is stated that in Section 5 as per clause (cci), "cooperative bank" means a state co-operative bank, a central cooperative bank and a primary co-operative bank. * clause (ccv) defines "primary co-operative bank" while clause (ccvii) defines "central co-operative bank" and "state co-operative bank" to have the meanings assigned to them in the NABARD Act, 1981. Since the expression 'banking company' is defined under the BR Act, 1949, it would be useful to consider the definition of banking company in Section 5(c) thereof which means any company which transacts the business of banking in India. "Banking" is defined in Section 5(b) of the said Act to mean ....
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....assigned to them in that Act. Section 2(x) of the said Act states that words and expressions used in the NABARD Act, 1981 and not defined either in the said Act or in the RBI Act, but defined in the BR Act, 1949, shall have the meanings respectively assigned to them in the BR Act, 1949. Therefore, we revert back to BR Act, 1949. 15.7. What is central to the controversy in this batch of cases is, whether, the appellant bank is a co-operative bank. What is of significance to know is, a state co-operative bank or central co-operative bank under the NABARD Act, 1981 is essentially a principal cooperative society either in a district or in a State, respectively, the primary object of which is the financing of other co-operative societies in the district or the State respectively. Further, NABARD Act, 1981 does not define banking business. Hence, reliance is to be placed, on the definition of banking business in terms of clause (w) of Section 2 of NABARD Act, 1981 which means the RBI Act has to be seen. When the RBI Act is perused, it is noted that clause (i) of Section 2 defines "cooperative bank", "co-operative credit society", "director", "primary agricultural credit society", "primar....
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....deduction but on the other hand, if it is a co-operative bank within the meaning of Section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then it would not be entitled to the benefit of deduction under sub-section (4) of Section 80P of the Act. 15.9. Section 56 of the BR Act, 1949 begins with a non-obstante clause which states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to certain modifications. The object of Section 56 is to provide a deeming fiction by equating a co-operative society to a banking company if it is a co-operative bank within the meaning of the said provision. This is because Chapter V of the BR Act, 1949, deals with application of the Chapter to co-operative societies which are co-operative banks within the meaning of the said chapter. For the purpose of these cases, what is relevant is that throughout the BR Act, 1949, unless the context otherwise requires, - references to a "banking company" or "the company" or "such company" shall be construed as ref....