KERALA STATE CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD. KSCARDB versus THE ASSESSING OFFICER, TRIVANDRUM AND ORS.

Citation: [2023] 12 S.C.R. 318 · Decided: 14-09-2023 · Supreme Court of India · Bench: B.V. NAGARATHNA · Disposal: Appeal(s) allowed

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Judgment (excerpt)

[2023] 12 S.C.R. 318 : 2023 INSC 830
CASE DETAILS
KERALA STATE CO-OPERATIVE AGRICULTURAL AND 
RURAL DEVELOPMENT BANK LTD. KSCARDB
v.
THE ASSESSING OFFICER, TRIVANDRUM AND ORS.
(Civil Appeal No(s).10069 of 2016)
SEPTEMBER 14, 2023
[B.V. NAGARATHNA AND UJJAL BHUYAN, JJ.]
HEADNOTES
Issue for consideration: Whether the appellant-assessee, a co-
operative society, is entitled to claim deduction of the whole of its profi ts 
and gains of business attributable to the business of banking or providing 
credit facilities to its members who are all co-operative societies u/s.80P, 
Income Tax Act, 1961.
Income Tax Act, 1961 – s.80P – Appellant, if a co-operative bank 
within the scope and meaning of sub-section (4) of s.80P and thus, not 
eligible to the benefi t of deduction as provided therein:
Held: No – Appellant is not a co-operative bank within the meaning of 
sub-section (4) of s.80P of the 1961 Act – Appellant is a co-operative credit 
society u/s.80P(2)(a)(i) of the 1961 Act whose primary object is to provide 
fi nancial accommodation to its members who are all other co-operative 
societies and not members of the public – If a cooperative society does not 
transact the business of banking as defi ned in clause (b) of s.5 of the BR 
Act, 1949, it would not be a cooperative bank – Then the defi nitions under 
the NABARD Act, 1981 would not apply – If a co-operative society is not 
a co-operative bank, then such an entity would be entitled to deduction but 
on the other hand, if it is a co-operative bank within the meaning of s.56 
of BR Act, 1949 r/w the provisions of NABARD Act, 1981 then it would 
not be entitled to the benefi t of deduction under sub-section (4) of s.80P 
of the 1961 Act – In the present case, although the appellant society is an 
apex cooperative society within the meaning of the State Act, 1984, it is 
318
319
not a co-operative bank within the meaning of s.5(b) r/w s.56 of the BR 
Act, 1949 – Order(s) of the Kerala High Court and other authorities to the 
contrary set aside – Appellant is not a co-operative bank and neither has it 
been so declared under the provisions of NABARD Act, 1981 or the State 
Act – Appellant entitled to the benefi t of deduction u/s.80P of the 1961 
Act – Banking Regulation Act, 1949 – ss.2(c), 5, 56 – National Bank for 
Agriculture and Rural Development Act, 1981 – ss.2(d), (u), (v)-(x) – Kerala 
Co-operative Societies Act, 1969 – s.110 – Kerala State Co-Operative 
Agricultural Development Banks Act, 1984 – s.2(a), (d), (iA) – Travancore-
Cochin Co-operative Societies Act, 1951 – s.10 – Reserve Bank of India 
Act, 1934.  [Paras 15.8, 15.12 and 15.13]
Income Tax Act, 1961 – s.80P(2)(a)(i) – Distinction between 
business of banking and providing credit facilities to its members by 
co-operative society:
Held: s.80P speaks about deduction in respect of income of cooperative 
societies from the gross total income referred to in sub-section (2) of the said 
Section – From the said income, there shall be deducted, in accordance with 
the provisions of s.80P, sums specifi ed in subsection (2), in computing the 
total income of the assessee for the purpose of payment of income tax – Sub-
section (2) of s.80P enumerates various kinds of co-operative societies – Sub-
section (2)(a)(i) states that if a co-operative society is engaged in carrying 
on the business of banking or providing credit facilities to its members, 
the whole of the amount of profi ts and gains of business attributable to any 
one or more of such activities shall be deducted – The sub-section makes a 
clear distinction between business of banking on the one hand and providing 
credit facilities to its members by co-operative society on the other – Thus, 
the defi nition of banking u/s.5(b) of the BR Act must be borne in mind as 
opposed to providing credit facilities to its members – Banking Regulation 
Act, 1949 – s.5(b). [Para 15.1]
Income Tax Act, 1961 – s.80P(4):
Held: Sub-section (4) of s.80P in the present form is in the nature of 
an exception which states that the provisions of s.80P shall apply in relation 
to any co-operative bank other than a primary agricultural credit society 
or a primary co-operative agricultural and rural development bank – The 
expressions co-operative bank and primary agricultural credit society as 
KSCARDB v. THE ASSESSING OFFICER, TRIVANDRUM 
AND ORS.
320
SUPREME COURT REPORTS 
[2023] 12 S.C.R.
well as primary co-operative agricultural and rural development bank are 
defi ned in the Exp

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