TaxTMI 
TaxTMI 
TaxTMI 
2023 (9) TMI 761
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 dated 26.11.2015 are narrated. 4. The facts, in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 decentralized section; and v) Rural housing needs of the rural-po....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rative 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 it would be entitled to deduction under Section 80P(2)(a)(i) on t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 societies as they apply to, or in relation to banking companies subject to the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....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 Venugopal, took us through various documents appended to the paper book in order to buttr....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ate 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 not a state co-operative bank whose primary object is the financing of other co-operative....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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 under Section 2(oc) of the State Act, 1969 and functioning in accordance with the State Act, 1984. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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-operative society, being a society engaged in the business of supplying of milk, oilseeds, fruits or vegetables, as the case may be; or (ii) the Government or a local authority; or (iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ncluded 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-term credit for agricultural and rural development activities. ii) The Banking Regulation Act, 1949 (BR ACT, 1949): The relevant provisions of the BR Act, 1949 are extracted as under. Section 3 of the said Act as it stood at the relevant point of time reads as follows: 3. Act to apply to certain co-operative societies in certain cases.-Nothing in this Act shall ap....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t 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 the banking facilities available in the proposed principal area of operations of the company, the potential scope for expansion of banks already in existence in the area and other relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of the banking system consistent with monetary stability and economic growth; (g) any other condition, the fulfilment of which would, in the opinion of the Reserve Bank, be necessary to ensure that the carrying on of banking business in India by t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nless 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:- (cci) "co-operative bank" means a state co-operative bank, a central co-operative bank and a primary co-operative bank; (ccii) "co-operative credit society" means a cooperative society, the primary object of which is to provide financial accommodation to its members and includes a co-operative land mortgage bank; (cciia) "co-operative society" means a society registered or deemed to have been registered under any Central Act for the time being in force relating to the multi-State co-operative societies, or any other Central or State law relating to cooperative societies for the time being in force; (cciii) "director", in relation to a co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h 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", "primary rural credit society" and "state co-operative bank" shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);" X X X (o) in section 22,- (i) for sub-sections (1) and (2) the following subsections shall be substituted, namely:- "(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless- (a) [***] (b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose: Provided that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a co-operative bank carrying on banking business at the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n (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 reference: 2. Definitions.- In this Act, unless the context otherwise requires, - X X X (d) "central co-operative bank" means the principal cooperative society in a district in a State, the primary object of which is the financing of other co-operative societies in that district: Provided that in addition to such principal society in a district, or where there is no such principal society in a district, the State Government may declare any one or more cooperative societies carrying on the business of financing other co-operative societies in that district to be also or to be a central co-operative bank or central co-operative banks within the meaning of this definition; X X X (u) "State co-operative bank" means the principal cooperative society in a State, the primary object of which is the financing of other co-operative societies in the State: Provided that in addition to such ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ety; X X X (ia) District Co-operative Bank" means a Central Society having jurisdiction over one revenue district and having as its members Primary Agricultural Credit Societies, Urban Co-operative Banks and the principal object of which is to raise funds to be lent to its members, including nominal or associate members, which existed under this Act, immediately before the commencement of the Kerala Co-operative Societies (Amendment) Act, 2019 and which has ceased to exist after the commencement of the said Amendment Act." X X X (oc) "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 term credit for agricultural and rural development activities: Provided that no Primary Co-operative Agricultural and Rural Development Bank shall be registered without the bifurcation of assets and liabilities of the existing societies having the area of operation in more than one taluk and the societies shall restrict their operation in the area of the respective society on such bifurcation; X X X (ra) "State Co-operative Agricultural and Rural Dev....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as its members including nominal or associate members of the District Co-operative Banks who shall continue as nominal or associate members of the Kerala State Co-operative Bank; X X X (iA) "Rural Development" means any activity intended to promote the development in rural area and intends the following developmental activities- (1) Development of handicrafts and other crafts; (2) Small Industries; (3) Cottage and Village industries; (4) Industries in tiny and decentralized section; (5) Rural housing needs of the rural-population. Judicial Precedent : 13. The relevant judgments of this Court as well as the Kerala High Court, having a bearing on the issues raised in these appeals could be adverted to at this stage: a) In Thalappalam Service Coop. Bank Ltd. vs. State of Kerala, (2013) 16 SCC 82, this Court has referred to Entry 32 of List II of Seventh schedule of the Constitution in paragraph 26 which reads as under: 26. The cooperative society is a State subject under Schedule VII List II Entry 32 to the Constitution of India. Most of the States in India enacted their own Cooperative Societies Act with a view to provide for the orderly development of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....less a co-operative society is a state cooperative bank or a central co-operative bank or a primary co-operative bank as defined under NABARD Act, 1981, no licence can be issued by Reserve Bank of India. It was further explained by this Court that under Section 22(1), a primary credit society can carry on banking business. However, if a cooperative society is not a primary credit society, then, to carry on banking business, it must be a co-operative bank and hold a licence issued by Reserve Bank of India. Therefore, a co-operative society other than a primary credit society, has to apply to Reserve Bank of India for licence before it can commence banking business. However, this does not mean that Reserve Bank of India can give to any or all co-operative societies, a banking licence. Reserve Bank of India can give a licence as provided in Section 22(1) only to a co-operative bank, which is defined under Section 56 of the said Act. It was further observed by this Court that when a term is specifically defined in a statute, then, for purposes of that statute, that term cannot bear a meaning assigned to it in another statute. One cannot ignore the specific definition given in the BR ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ords "Co-operative Societies Act, 1912" in the NABARD Act, 1981 also indicates that the definition is restricted to societies registered under the law relating to co-operative societies in the State in which they want to operate. Thus, the term "any other law relating to co-operative societies for the time being in force in any State" necessarily means only a State law. Further, under the NABARD Act, 1981, a state co-operative bank has to be the principal co-operative society in the State, the primary object of which must be financing other co-operative societies in that State. The proviso to Section 2(u) of NABARD Act, 1981 enables the State to declare, in addition to an existing principal society in the State or where there is no principal society in the State, any one or more co-operative banks as State co-operative banks. However, this does not mean that the State Governments can, at their whims and fancies, declare any co-operative society to be a "State co-operative bank". Before such a declaration can be made, the State Government must necessarily be satisfied- (a) that it is a principal co-operative society in the State; (b) that it is carrying on business in the State; and....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ks as defined in that Act. Hence, they are "co-operative banks" as defined in Section 5 (cci) of BR Act, 1949, falling within the BR Act, 1949. It was further observed that co-operative banks are further divided into apex banks and other banks. The Kerala State Co-operative Bank is an apex bank and the district co-operative banks are other banks. The primary object or business of the state co-operative bank, the district co-operative banks and the urban banks in the co-operative sector is the transaction of banking business. Further, it was observed that the provisions of the SARFAESI Act and particularly Section 13 thereof are also applicable to the institutions, namely, the Kerala State Co-operative Bank Ltd., the district co-operative banks and the urban co-operative banks. e) In Citizen Co-operative Society Ltd. vs. Commissioner of Income Tax, (2017) 9 SCC 364 ("Citizen Co-operative Society Ltd."), appellant therein was a co-operative society which was denied benefit of Section 80P on the ground that it is a co-operative society of the nature covered by sub-section (4) of Section 80P of the Act and, therefore, disentitled to get the benefit. The question, therefore, was wheth....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... attributable to any one or more of such activities which are mentioned in sub-section (2). Sub-section (4) of Section 80P inserted by the Finance Act, 2006 is in the nature of a proviso and such a deduction under the said Section shall not be admissible to a cooperative bank. Thus, co-operative banks are now specifically excluded from the ambit of Section 80P of the Act. The appellant therein was not a co-operative bank and it did not require a licence of the Reserve Bank of India to conduct its business. Therefore, it would not come within the mischief of sub-section (4) of Section 80P of the Act. However, the appellant therein was held to be not entitled to the benefit under Section 80P of the Act as it was a cooperative society meant only for its members and providing credit facilities to its member only. There were resident members or ordinary members but there were also another category of members called nominal members who were making deposits with the appellant therein for the purpose of obtaining loans, etc. and, they were not members in real sense. Most of the business of the appellant therein was with this second category of persons i.e. members of the general public wh....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y one or more such activities under the sub-section could be given. On the other hand, in the said case, it was argued on behalf of the revenue that a society undeserving of any deduction cannot get a deduction contrary to what has been sought to be achieved by Section 80P(4) of the Act. That the judgment of this Court in Citizen Cooperative Society Ltd. was correctly read by the Full Bench of the Kerala High Court which is to the effect that the Assessing Officer must assess the real facts of a case in order to conclude as to whether activities of a primary agricultural credit society were, in fact, being carried out in the assessment year in question for which such an entity must adduce facts to show that it is in fact carrying on its business as a primary agricultural credit society in the assessment year in question. If it was unable to discharge such burden then such a society cannot avail of any deduction under Section 80P of the Act. This Court considered the definition of co-operative society under clause (19) of Section 2 of the Act in the context of Section 80P of the Act, specially in light of sub-section (4) thereof as well as Sections 3 and 56 of the BR Act, 1949 and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....b) qua milk cooperative societies, the legislature expressly says so - which is not the case with Section 80-P(2)(a)(i) 24.5. That Section 80-P(4) is in the nature of a proviso to the main provision contained in Sections 80-P(1) and (2). This proviso specifically excludes only cooperative banks, which are cooperative societies who must possess a licence from RBI to do banking business. Given the fact that the assessee in that case was not so licensed, the assessee would not fall within the mischief of Section 80-P(4). X X X 39. Coming to the provisions of Section 80-P(4), it is important to advert to the speech of the Finance Minister dated 28-2-2006, which reflects the need for introducing Section 80-P(4). Shri P. Chidambaram specifically stated: "166. Cooperative Banks, like any other bank, are lending institutions and should pay tax on their profits. Primary Agricultural Credit Societies (PACS) and Primary Cooperative Agricultural and Rural Development Banks (PCARDB) stand on a special footing and will continue to be exempt from tax under Section 80-P of the Income Tax Act. However, I propose to exclude all other cooperative banks from the scope of that section." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as such cooperative bank must be engaged in the business of banking as defined by Section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment, of deposits of money from the public. Likewise, under Section 22(1)(b) of the Banking Regulation Act, 1949 as applicable to cooperative societies, no cooperative society shall carry on banking business in India, unless it is a cooperative bank and holds a licence issued in that behalf by RBI. As opposed to this, a primary agricultural credit society is a cooperative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 43. As a matter of fact, some primary agricultural credit societies applied for a banking licence to RBI, as their bye-laws also contain as one of the objects of the Society the carrying on of the business of banking. This was turned down by RBI in a letter dated 25-10- 2013 as follows: "Application for licence Please refer to your application dated 10- 4-2013 requesting for a banking licence. On a scrutiny of the application, we observe that yo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 of BR Act, 1949 irrespective of whatever nomenclature it may have or structure it may possess or incorporated under any Act. It was further stated that if a bank has to be a state cooperative bank, there has to be a declaration made by the State Government in terms of Section 2(u) of NABARD Act, 1981. Hence, it is necessary to go into the question as to, whether, the appellant herein has been so declared as a state co-operative bank. This question would need not detain us for long as the Kerala High Court in A.P. Varghese had categorically stated that the "Kerala State Co-operative Bank" is a "state co-operative bank" as defined under the NABARD Act, 1981. Therefore, the appellant bank has not been declared as a state cooperative bank under the provisions of NABARD Act, 1981. Further, in the case of Mavilayi Service Co-operative Bank, this Court observed that a co-operative bank would engage in banking business on obtaining a licence under Section 22(1b) of the BR Act, 1949. In the instant case, the appellant herein is not a co-operative bank having regard to the aforesaid conspectus of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....deduction and attributability of amount of profits and gains to an activity is a real one. Since profits and gains from credit facilities given to non-members cannot be said to be attributable to the activity of providing credit facilities to its members, such amount cannot be deducted. vii) Seventhly, under Section 80P(1)(c), the co-operative societies must be registered either under Co-operative Societies Act, 1912, or a State Act and may be engaged in activities which may be termed as residuary activities i.e. activities not covered by sub-clauses (a) and (b), either independently of or in addition to those activities, then profits and gains attributable to such activity are also liable to be deducted, but subject to the cap specified in sub-clause (c). viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other co-operative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole. 14.4. In paragraph 42 of Mavilayi Service Co-operative Bank, this Court observed that the object and purpose of sub-section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... income tax. Sub-section (2) of Section 80P enumerates various kinds of co-operative societies. Sub-section (2)(a)(i) states that if a co-operative society is engaged in carrying on the business of banking or providing credit facilities to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities shall be deducted. The sub-section makes a clear distinction between business of banking on the one hand and providing credit facilities to its members by co-operative society on the other. Thus, the definition of banking under Section 5(b) of the BR Act must be borne in mind as opposed to providing credit facilities to its members. 15.2. Section 80P was inserted to the Act with effect from 01.04.1968, however, sub-section (4) was reinserted with effect from 01.04.2007, in the present form. Earlier sub-section (4) was omitted with effect from 01.04.1970. Sub-section (4) of Section 80P in the present form is in the nature of an exception which states that the provisions of Section 80P shall apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rura....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ety must be engaged in banking business as defined in Section 5(b) of the said Act. For that, Section 22 of the BR Act, 1949, speaks about licence to be obtained by a bank to do banking business which is modified as per clause (o) of Section 56 thereof which states that no cooperative society shall carry on banking business in India unless it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose. Secondly, a co-operative society must obtain a licence under Section 22 of the BR Act, 1949, only if it functions as a co-operative bank and not otherwise. Thus, a co-operative society including a co-operative credit society which is not a co-operative bank does not require a licence to function as such. 15.5. Further, Section 2(d) of NABARD Act, 1981 defines central cooperative bank while Section 2(u) defines a state co-operative bank to mean the principal co-operative society in a State, the primary object of which is financing of other co-operative societies in the State which means, it is in the nature of an apex co-operative bank having regard to the definition under Section....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... bank and a primary co-operative bank and central co-operative bank and state co-operative bank to have the same meanings as NABARD Act, 1981. 15.8. Since the words 'bank' and 'banking company' are not defined in the NABARD Act, 1981, the definition in sub-clause (i) of clause (a) of Section 56 of the BR Act, 1949 has to be relied upon. It states that a cooperative society in the context of a co-operative bank is in relation to or as a banking company. Thus, co-operative bank shall be construed as references to a banking company and when the definition of banking company in clause (c) of Section 5 of the BR Act, 1949 is seen, it means any company which transacts the business of banking in India and as already noted banking business is defined in clause (b) of Section 5 to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. Thus, it is only when a co-operative society is conducting banking business in terms of the definition referred to above that it becomes a co-operative bank and in such a case, Section 22 of the BR Act, 1949 would apply wherein i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....while considering the definition of a co-operative bank under Section 56(cci) of the BR Act, 1949, to mean a state cooperative bank, a central co-operative bank and a primary co-operative bank which is defined in (ccviii) thereof, to have meanings respectively assigned to them in the NABARD Act, 1981 would imply that if a state co-operative bank is within the meaning of NABARD Act, 1981 then it would be excluded from the benefit under Section 80P of the Act. Conversely, if a co-operative society is not a co-operative bank within the meaning of Section 56 of the BR Act, 1949, it would be entitled to the benefit of deduction under Section 80P of the Act. 15.11. Looked at from another angle, a co-operative society which is not a state co-operative bank within the meaning of NABARD Act, 1981 would not be a co-operative bank within the meaning of Section 56 of the BR Act, 1949. In the instant case, as already noted in A.P. Varghese case, the Kerala State Co-operative Bank being declared as a state co-operative bank by the Kerala State Government in terms of NABARD Act, 1981 and the appellant society not being so declared, would imply that the appellant society is not a state co-operati....