TaxTMI 
TaxTMI 
2024 (9) TMI 1886
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....under Section 80P(2)(d). 2. The Ld Commissioner of Income-tax (Appeals),NFAC, Delhi has erred in confirming action of Ld AO not allowing the deduction under Section 80P(2)(d) in respect of interest income received from Co-operative bank to the tune of Rs. 47,62,521/- on the ground that the co-operative bank is not a co-operative society." 3. The relevant facts in brief are that the Assessee a registered co-operative society, carrying on business of providing credit facilities to its members, filed return of income for the Assessment Year 2018-19, claiming deduction of INR 32,20,000/- under Section 80P(2)(a)(i) and INR 47,62,521/- under Section 80P(2)(d) of the Act. The case of the Appellant was selected for scrutiny and the Assessing Officer passed assessment Order, under Section 143(3) read with Section 143(3A)/(3B) of the Act on 26/02/2021, rejecting the claim for deduction under Section 80P(2)(d) of the Act on the ground that benefit of the aforesaid section was not available in respect of interest earned on deposit/investment made in a co-operative bank since a co-operative bank is not a co-operative society. 4. The appeal preferred by the Assessee against the af....
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....r section 5 of the Andhra Pradesh Mutually Aided Cooperative Societies Act, 1995. As operations of the assessee began to spread over States outside the State of Andhra Pradesh, the assessee got registered under the Multi-State Cooperative Societies Act, 2002 as well. The question that the Court posed to itself was as to whether the appellant was barred from claiming deduction in view of Section 80P(4) of the Income-tax Act - see paragraph 5. After setting out the findings of fact in that case, and the income tax authorities concurrent holding that the society is carrying on banking business and for all practical purposes acts like a co-operative bank, this Court then held as follows: xx xx 21. An analysis of this judgment would show that the question of law that was reflected in paragraph 5 of the judgment was answered in favour of the assessee. The following propositions may be culled out from the judgment: (I) That section 80P of the IT Act is a benevolent provision, which was enacted by Parliament in order to encourage and promote the growth of the co-operative sector generally in the economic life of the country and must, therefore, be read liberally ....
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.... alone, the Full Bench's understanding of this judgment has to be faulted and is set aside. 27. However, this does not conclude the issue in the present case. We now turn to the proper interpretation of section 80P of the Income-tax Act. Firstly, the marginal note to section 80P which reads "Deduction in respect of income of co-operative societies" is important, in that it indicates the general "drift" of the provision. This was so held by this Court in K.P. Varghese v. ITO [1981] 7 Taxman 13/131 ITR 597 as follows: "9. This interpretation of sub-section (2) is strongly supported by the marginal note to Section 52 which reads "Consideration for transfer in cases of understatement". It is undoubtedly true that the marginal note to a section cannot be referred to for the purpose of construing the section but it can certainly be relied upon as indicating the drift of the section or, to use the words of Collins, M.R. in Bushel v. Hammond [1904] 2 KB 563 to show what the section is dealing with. It cannot control the interpretation of the words of a section particularly when the language of the section is clear and unambiguous but, being part of the statute, it pri....
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.... the same direction, in that interest or dividend income derived by a co-operative society from investments with other cooperative societies, are also entitled to deduct the whole of such income, the object of the provision being furtherance of the co-operative movement as a whole. 36. Coming to the provisions of section 80P(4), it is important to advert to speech of the Finance Minister dated 28-2-2006, which reflects the need for introducing section 80P(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 80P of the Income-tax Act. However, I propose to exclude all other cooperative banks from the scope of that section." 37. Likewise, a Circular dated 28-12-2006, containing explanatory notes on provisions contained in the Finance Act, 2006, is also important, and reads as follows: "Withdrawal of tax benefits available to certain cooperative banks ....
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....eans 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 co-operative societies, no co-operative 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 RBI. As opposed to this, a primary agricultural credit society is a co-operative society, the primary object of which is to provide financial accommodation to its members for agricultural purposes or for purposes connected with agricultural activities. 40. As a matter of fact, some primary agricultural credit societies applied for a banking licence to the 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 the RBI in a letter dated 25-10-2013 as follows: "Application for license Please refer to your application dated April 10, 2013 requesting for a banking license. On a scrutiny of the application, we observe that you are registered as a Primary Agricultural Credit Society (PACS). In this connection, we have....