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Vaildity Deduction u/s 80P to credit cooperative society providing credit to its members is cooperative Bank
Deduction u/s 80P to credit cooperative society is widely contested by Revenue on the ground that cooperative society providing credit to its members is cooperative bank for the purpose of section 80P(4) and hence, it is not eligible for deduction u/s 80P(2).
Recently, this issue came up before Supreme Court in the case of PCIT Vs. Annasaheb Patil Mathadi Kamgar Sahkari Patpedhi Limited – Civil Appeal No. 8719/2022 – order dated 20 April 2023. In this case, Supreme Court referred to it’s earlier decision in Mavilayi Service Cooperative Bank Limited and Others Vs. Commissioner of Income Tax, Calicut and Another (2021) 7 SCC 90 and also noted CBDT Circular and the definition of Bank under the Banking Regulation Act. It held in favour of assessee with following observations –
“merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also.”
One can only hope Department will follow this order in letter and spirit.