By TIOL News Service

CHENNAI, DEC 06, 2016: THE ISSUE IS - Whether a Co-operative Credit society engaged in selling agricultural produce of its members, is eligible for the benefit of section 80P in respect of the interest received from its members. YES IS THE VERDICT.

Facts of the case:

The assessee, a Co-operative Marketing Society engaged in selling of agricultural produce of the members, was served with notice u/s 143 by AO. In response, it had claimed that its income is not liable to suffer any assessment, the assessee being a Co-operative Credit Society, but not a Co-operative Bank. The stand of assessee was confirmed by AO, CIT(A) and latter by tribunal.

On appeal, the HC held that,

++ Banking means accepting of deposits of money from the public repayable on demand or otherwise and withdrawable by cheque, draft, order or otherwise and such acceptance of money is intended for the purpose of lending or investment by itself. Therefore, the crucial expression relevant for making one answer the description of banking is that it is capable of accepting money from the general public but not necessarily confined to its members. Any such activity carried on by anybody requires, apart from licensing, to answer the regulatory domain prescribed under the 1949 Act. Even a Co-operative Bank which carries on banking activity requires to be regulated by the provisions of the 1949 Act. Section 80P (4) therefore is clearly attracted to such an institution. But not to credit society. Even while dealing with a Co-operative Bank sub-section (4) has taken care to ensure that the Primary Agricultural Credit Societies and Primary Co-operative Agricultural and Rural Development Banks are kept out of the purview of the said provision. Sub-section (4) of Section 80P therefore, in its application is confined to Co-operative Banks only;

++ In the instant case the Assessee being, a Co-operative Credit Society which in turn is providing for certain credit facilities to its members alone but not to the general public at large and which also does not receive monies by way of deposit from the general public, it does not answer the description of a Co-operative Bank. Consequently, the main provision contained under sub-section (i) of Section 80P gets attracted and consequently the Assessee is entitled to seek the deduction which has been provided for u/s 80P. In view of the concurrence that the Assessee is a mere Co-operative Credit Society but not a Co-operative Bank, it can be concluded that the order passed by the AO as well as the Appellate Authority and the conclusion arrived at by the Tribunal are not erroneous and hence there is no merit in these appeals and accordingly the appeal stands rejected.

(See 2016-TIOL-2929-HC-MAD-IT)