The recent Supreme Court ruling has provided significant clarity regarding the eligibility of cooperative societies for deductions under Section 80P of the Income Tax Act, even if they do not engage in traditional banking activities as defined in the Banking Regulation Act, 1949 (BR Act).
The crux of the Court’s decision lies in the interpretation of the term ‘cooperative bank’ as defined in Section 56 of the BR Act. The Court asserted that for a cooperative society to be considered a ‘cooperative bank’ under this definition, it must actively transact banking business as outlined in Section 5(b) of the BR Act.
In cases where a cooperative society does not conduct the specific banking activities delineated in the BR Act, it cannot be categorized as a ‘cooperative bank’ under Section 56 of the BR Act. Consequently, such entities are entitled to claim deductions under Section 80P of the Income Tax Act.
This ruling underscores the importance of precise statutory definitions and criteria in determining eligibility for tax deductions. It reaffirms that cooperative societies providing credit facilities to their members, even if not engaging in traditional banking activities, are entitled to the benefits of Section 80P. This decision aligns with the principle of fairness and inclusivity in the tax regime, ensuring that cooperative societies are not unduly excluded from enjoying the intended tax incentives designed to support their cooperative and member-oriented operations.
