NEW DELHI- In a major relief to Cooperative Credit Societies, the Supreme Court of India has ruled that under Section 80P [2] of the Income Tax Act, the said cooperatives will not be termed as banks and will continue to be eligible for exemption from income tax.
According to the judgment copy shared by the National Federation of Urban Cooperative Banks and Credit Societies [NAFCUB] through social media, the Court dismissed Principal Commissioner’s Appeal no. 8719/2022, which states that Cooperative credit Societies should be subjected to Tax deductions.
The Court passed a judgment in the matter of CIT Vs. Annasaheb Patil Mathadi Kamgar Sahakari Patpedhi Limited (Civil Appeal No. 8719/2022).
“The Apex Court has dismissed an Appeal by Revenue seeking to impose tax on the Assessee (a cooperative society) on the ground that the Assessee Society is a Cooperative Bank as it is engaged in activity of giving loan/credit and hence not entitled to this deduction by virtue of provisions of section 80(P) (4) of the said Act.”
In the ruling the Court noted that merely giving credit to its members a Cooperative Credit Society cannot be said to be the Cooperative Bank/Bank under the provisions of Banking Regulation Act, 1949. “The banking activities under the Banking Regulation Act are altogether different activities and there is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including credit to the public at large also”.
The Court also observed that even otherwise on merits also and taking into consideration the CBDT circulars and even the definition of “Bank” under Banking Regulation Act, the provisions of section 80P(4) shall not be applicable to the Assessee and the Assessee shall be entitled to exemption/benefit us 80(P) of the Income Tax Act, 1961.
Welcoming the Court ruling, Nafcub President Jyotindra Mehta said, “It’s an historic judgment. Since, for the last many years we are with this issue but now with the passage of judgment by the Honorable Supreme Court, we are taking a sigh of relief.”
“Many cases related to Income Tax deduction have been pending in different courts of the country. The judgment shall be applicable to all the credit co-ops in the country”, he was quoted by Indian Cooperative.
Maharashtra State Cooperative Credit Societies Federation [MAFCOCS] chairman, Kaka Koyate is quoted by Indian Cooperative as saying, “We are happy with the judgment in favour of credit co-ops of the country. There are many court cases pending related to the income tax deduction in various courts but now the Honourable Supreme Court’s judgment will be applicable to all societies.
“On several occasions, after approaching the Income Tax appellate authority, we have got the relief but now we have to no more knock on the door of authority.”
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