Cooperative Banks vs. Primary Agricultural Credit Societies: Implications for Section 80P Deduction

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..... y the Income Tax Appellate Tribunal (ITAT) concerning the deduction u/s 80P of the Income Tax Act, 1961, for cooperative societies. The case revolves around the eligibility of a cooperative society, registered as a Primary Agricultural Credit Society (PACS) under the Kerala Cooperative Societies Act, 1969, to claim deduction u/s 80P(1) read with Section 80P(2)(a)(i) of the Act. Arguments Presente .....

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..... erative bank as per the definition in the BRA and, therefore, excluded from the benefit of deduction u/s 80P by virtue of Section 80P(4) of the Act. Discussions and Findings of the Court Definition of Banking Business The ITAT referred to Section 5(b) of the BRA, which defines "banking" as "the accepting, for the purpose of lending or investment, of deposits of money from the pub .....

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..... s the provision recognizes "banking" as an eligible activity for a cooperative society. Definition of Cooperative Bank The ITAT referred to Section 5(cci) and Section 5(ccv) of the BRA, which define "cooperative bank" and "primary cooperative bank," respectively. The ITAT noted the assessee's claim that its bye-laws permit the admission of other cooperative soci .....

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..... lifies as a cooperative bank under the BRA's definition, construed strictly. The AO was instructed to determine the assessee's entitlement to exemption u/s 80P(1) read with Section 80P(2)(a)(i) accordingly. The ITAT clarified that despite not being a PACS under the Act, the assessee is a cooperative society under the Kerala Cooperative Societies Act, 1969, satisfying the requirement of Se .....

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..... of Section 80P(4) of the Act. The ITAT directed the AO to examine the assessee's bye-laws and conduct necessary verifications to issue a definite finding on the assessee's status as a cooperative bank under the BRA's definition. The ITAT preserved the legal terminology and significant phrases from the original text, ensuring the accuracy of the analysis and adherence to the legal prin .....

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