LexTHE CITIZEN CO-OPERATIVE SOCIETY LIMITED, THROUGH ITS MANAGING DIRECTOR, HYDERABAD versus ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE~9(1), HYDERABAD
Open in Lexace · Ask the AI about this caseJudgment (excerpt)
[2017] 9 S.C.R. 361
THE CITIZEN CO-OPERATIVE SOCIETY LIMITED,
A
THROUGH ITS MANAGING DIRECTOR, HYDERABAD
v.
ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE~9(1), .
HYDERABAD
(Civil Appeal No. I 0245 of2017)
B
.
AUGUST08,2017
.
[A. K. 81100 ANDASllOKBHUSHAN, JJ.] .
Co-operative · Soi:ieties -
Income Tax Act, 196I. · -
· s. 80P(2)(a)(i) ·:- Deduction under~ ;When. not available ~Appellant-
C
society claiming to be a co-operative i;ociety, sought deduction in
respect of its income -Assessing Officer held that deduction uls. 80P
was not admissible to the appellant as the benefit of deduction was
admissible to those co-operative societies that carry on business of
banking or providing credit facilities to its members, however, the
D
appellant was carrying on the banking business for pil.blic at large
and its operation was not con.fined to its members only - Appeal
thereagainst rejected by CIT (A) upholding the oiver of Assessing
·Officer - Further appeal to ITAT and High Court, dismissed - On
appeal, held: Appellant was catering to two distinct categories of
people, the first was that of 'resident members' and the other
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category was of 'nominal members' who were making deposits with
the assessee for the purpose of obtaining loans, etc. and were not
members in real sense - Thus,. the activity ofthe appellant was that
of .finance business and cannot be termed as co-operative society -
Further, the appellant was engaged in the activity of granting loans
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to general public as well - Therefore, the appellant cannot be
treated as a co-operative society meant only for its members and .
providing credit facilities to its members - Such a society cannot
claim the benefit of s. 80P - Mutually Aided Co-operative Societies
Act, I995 - Banking.
Income Tax Act, I96I - s. BOP - Interpretation of - Held:
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Section BOP is a benevolent provision enacted by the Parliament to
encourage and promote growth of co-operative sector in the
economic life of the country - Therefore, such a provision has to be
read liberally, reasonably and in favour of the assessee -
Interpretation of Statutes - Benevolent/Beneficial provision.
H
361
362
SUPREME COURT REPORTS
[2017) 9 S.C.R.
A
Income Tax Act, 1961 - s. 80P(4) - 'Co-operative Bank' -
When not - Whether activity/business of the appellant was that qf a
co-operative bank governed by Banking Regulation Act, 1949 and
hence it was not entitled to benefit of deduction u/s. 80P - Held:
Sub-sec.(4) to s. 80P is in the nature of a proviso and provides that
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deduction u/s. 80P shall not be admissible to a co-operative bank -
Howeve1; in the instant case, the appellant does not get covered
under the definition of 'co-operative bank' - Further, RBI itself
had clarified that the business of appellant does not amount to that
of a co-operative bank - Therefore, appellant would not come within
the mischief of sub-sec. (4) of s. BOP - Finance Act; 2006 - Banking
C Regulation Act, 1949.
Dismissing the appeal, the Court
HELD: 1.1 Section SOP of the Income Tax Act, 1961 is a
benevolent provision which is enacted by the Parliament in order
to encourage and promote growth of co-operative sector in the
D economic life of the ('Ountry. It was done pursuant to declared
policy of the Government. Therefore, such a provision has to be
read liberally, reasonably and in favour of the assessee. It is also
trite that such a provision has to be construed as to effectuate
the object of the Legislature and not to defeat it. Therefore, all
E those co-operative societies which fall within the purview of
Section SOP of the 1961 Act are entitled to deduction in respect
of any income referred to in sub-section (2) thereof. Clause( a) of
sub-section (2) gives exemption of whole of the amount of profits
and gains of business attributable to any one or more of such
activities which are mentioned in sub-section (2).[Para 18)(375-
F C-F)
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1.2 Sub-section (i) of clause (a) of sub-section (2) recognises
two kinds of co-operative societies, namely: (i) those carrying on
the business of banking and; (ii) those providing credit facilities
to its members. (Para 19)[375-F-G)
1.3 With the insertion of sub-section (4) by the Finance
Act, 2006, which is in the nature of a proviso to Section SOP, it is
made clear that such a deduction shall not be admissible to a co-
operative bank. However, if it is a primary agriculture credit
society or a primary co-operative agriculExcerpt shown. Read the full judgment & AI analysis in Lexace.