Deduction u/s 80P(4) is not allowable to Co-operative Marketing Society: Madras HC [Read Judgment]

Madras High Court

In a recent ruling, the Madras High Court held that the deduction under section 80P(4) of the Income Tax Act, 1961 cannot be extended to a Co-operative Marketing Society since the same is confined to Co-operative banks only.While upholding the orders of the lower authorities, the Court clarified that the Assessee, being a mere Co-operative Credit Society but not a Co-operative Bank, is not eligible for deduction under the above section in respect of interest received from its members.

In the instant case, the assessee is a Co-operative Marketing Society engaged in selling of agricultural produce of the members. It also carries out the business of banking and providing credit facilities to its members.The assessee’s claim for deduction in respect of interest received from members were disallowed by the Assessing Officer.

On appeal, the Tribunal held that the assessee is eligible for deduction under section 80P(2)(a)(i) when it is not a cooperative society engaged in the business of banking or providing credit facilities to its members.

A Co-operative Society is providing facilities to its members alone then the income generated thereby is not liable to be taken into account and shall be deducted from its gross total income.

The division bench comprising of Justice Nooty Rama Mohana Rao and Justice Anita Sumant observed that Section 80P(4) gets attracted only to such Co operative Societies which fall within the ambit of the expression ‘Co-operative Bank’.

It was also observed that section 80P(4) of the Act covers even a Co-operative Bank which carries on banking activity requires to be regulated by the Banking Regulation Act, 1949.

“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 under Section 80P.” the Court said.

Read the full text of the Judgment below.