THE MAVILAYI SERVICE COOPERATIVE BANK LTD. & ORS. versus COMMISSIONER OF INCOME TAX, CALICUT & ANR.

Citation: [2021] 1 S.C.R. 78 · Decided: 12-01-2021 · Supreme Court of India · Bench: R.F. NARIMAN · Disposal: Disposed off

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Judgment (excerpt)

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SUPREME COURT REPORTS
[2021] 1 S.C.R.
THE MAVILAYI SERVICE COOPERATIVE
BANK LTD. & ORS.
v.
COMMISSIONER OF INCOME TAX, CALICUT & ANR.
(Civil Appeal Nos.7343-7350 of 2019)
JANUARY 12, 2021
[R. F. NARIMAN, NAVIN SINHA AND K. M. JOSEPH, JJ.]
Income Tax Act, 1961: s.80P(2) – Deduction for Cooperative
Societies – Assessees registered as ‘Primary Agriculture Credit
Societies’ under Kerala Cooperative Societies Act, 1969 – They are
stated to be providing credit facilities to their members for
agricultural and allied purposes – Claim for deduction under
s.80P(2)(a) – Whether assessees are entitled to such deductions
after introduction of s.80P(4) by s.19 of Finance Act, 2006 w.e.f.
1.4.2007 –  Held: Assessees are entitled to benefit of deduction
contained in s.80P(2)(a)(i), notwithstanding that they may also be
giving loans to their members which are not related to agriculture –
In case it is found that there are instances of loans given to non-
members, profits attributable to such loans are not deductible.
Income Tax Act, 1961: s.80P(2) – Beneficial provision – Held:
s.80P must be construed with the object of furthering the co-
operative movement generally – s.80P, being a benevolent provision
enacted by Parliament to encourage and promote the credit of the
co-operative sector in general must be read liberally and reasonably,
and if there is ambiguity, in favour of the assessee – A deduction
that is given without any reference to any restriction or limitation
cannot be restricted or limited by implication, as is sought to be
done by the Revenue in the present case by adding the word
“agriculture” into s.80P(2)(a)(i) when it is not there –  Further,
s.80P(4) is to be read as a proviso, which proviso now specifically
excludes co-operative banks which are co-operative societies
engaged in banking business – Considering the definition of
‘member’ under the Kerala Act, loans given to such nominal members
would qualify for the purpose of deduction under s.80P(2)(a)(i) –
Thus, giving of loans by a primary agricultural credit society to
non-members is not illegal – Interpretation of statutes.
   [2021] 1 S.C.R. 78
78
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Disposing of the appeals, the Court
HELD : 1. Interpretation of Section 80P of the IT Act.
The marginal note to Section 80P which reads “Deduction in
respect of income of co-operative societies” indicates the general
“drift” of the provision. Secondly, for purposes of eligibility for
deduction, the assessee must be a “co-operative society”. A co-
operative society is defined in Section 2(19) of the IT Act, as
being a co-operative society registered either under the Co-
operative Societies Act, 1912 or under any other law for the time
being in force in any State for the registration of co-operative
societies. This, therefore, refers only to the factum of a co-
operative society being registered under the 1912 Act or under
the State law. For purposes of eligibility, it is unnecessary to probe
any further as to whether the co-operative society is classified as
X or Y. Thirdly, the gross total income must include income that
is referred to in sub-section (2). Fourthly, sub-clause (2)(a)(i) then
speaks of a co-operative society being “engaged in” carrying on
the business of banking or providing credit facilities to its
members. What is important qua sub-clause (2)(a)(i) is the fact
that the co-operative society must be “engaged in” the providing
credit facilities to its members.  Fifthly, the burden is on the
assessee to show, by adducing facts, that it is entitled to claim
the deduction under Section 80P. Therefore, the assessing officer
under the IT Act cannot be said to be going behind any registration
certificate when he engages in a fact-finding enquiry as to whether
the co-operative society concerned is in fact providing credit
facilities to its members.  Such fact finding enquiry (see section
133(6) of the IT Act) would entail examining all relevant facts of
the co-operative society in question to find out whether it is, as a
matter of fact, providing credit facilities to its members, whatever
be its nomenclature. Once this task is fulfilled by the assessee,
by placing reliance on such facts as would show that it is engaged
in providing credit facilities to its members, the assessing officer
must then scrutinize the same, and arrive at a conclusion as to
whether this is, in fact, so. Sixthly, the expression “providing credit
facilities to its members” does not necessarily mean a

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