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TMI BlogA Contemporary Recasting of Section 80P for Strengthening the Co-operative Sector : Clause 149 of the Income Tax Bill, 2025 Vs. Section 80P of the Income-tax Act, 1961X X X X Extracts X X X X X X X X Extracts X X X X ..... , which plays a pivotal role in India's socio-economic landscape, especially in agriculture, rural finance, and community development. The rationale behind such provisions lies in the recognition of the unique, mutual-benefit, and often non-profit-oriented structure of co-operative societies. By granting deductions on certain income streams, the legislature aims to foster the growth of co-operatives, promote rural credit, and encourage collective economic activity. However, over time, amendments and judicial interpretations have shaped the contours of these deductions, leading to ongoing debates on their scope and application. This commentary provides a detailed analysis of Clause 149, its objectives, structure, and practical implicatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9 is structured into six sub-sections. Each sub-section is analyzed below, with cross-references to the corresponding provisions in Section 80P. 1. Eligibility and Computation Clause 149(1) establishes the foundational principle: where a co-operative society's gross total income includes specified income, the sums mentioned in sub-section (2) shall be allowed as deduction in computing total income. This mirrors Section 80P(1), maintaining the same eligibility framework. The deduction is not automatic; it is subject to the conditions and limits set out in the subsequent sub-sections. 2. Scope of Deductible Incomes Clause 149(2) enumerates the categories of income eligible for deduction. The structure and language closely fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve societies engaged in activities not specified in (a) or (b), deduction is limited to: * One lakh rupees for consumers' co-operative societies (increased from earlier limits in Section 80P); * Fifty thousand rupees in other cases. * This is consistent with Section 80P(2)(c), though the monetary limits are updated. * (d) Interest or Dividends from Investments with Other Co-operative Societies: * Full deduction of such income, as per Section 80P(2)(d). * (e) Letting of Godowns or Warehouses: * Full deduction of income from letting for storage, processing, or marketing of commodities (Section 80P(2)(e)). * (f) Small Societies with Low Gross Total Income: * For societies (other than housing, urban consumers', transpo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gricultural and rural development bank. Section 80P(4) similarly denies the deduction to co-operative banks, except for these two categories, reflecting legislative intent to curb abuse by large, quasi-commercial co-operative banks. 6. Definitions Key definitions are provided under Clause 149(6) for: * Consumers' co-operative society; * Co-operative bank and primary agricultural credit society (as per the Banking Regulation Act, 1949); * Primary co-operative agricultural and rural development bank (area confined to taluk, principal object being provision of long-term credit for agriculture and rural development). This mirrors the explanations and definitions in Section 80P. Practical Implications Clause 149, like Se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, a restatement and updating of Section 80P, with certain clarifications and rationalizations. The following table summarizes the key similarities and differences: Provision Section 80P of the Income-tax Act, 1961 Clause 149 of the Income Tax Bill, 2025 Comments Scope of Deduction Profits and gains from specified activities, interest/dividends, godown letting, small societies' income Substantially identical categories Clause 149 modernizes language, raises monetary limits Eligibility Co-operative societies, subject to exclusions Same No substantive change Primary Societies (Milk, Oilseeds, etc.) Full deduction for supply to certain entities Same, but references updated to Companies Act, 2013 Reflects leg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty or Litigation Despite the close alignment, several issues that have been the subject of litigation u/s 80P may persist under Clause 149: * Meaning of "Attributable to": Courts have held that "attributable to" is wider than "derived from," allowing deductions for income that has a direct nexus with eligible activities. The application of this principle may continue to invite disputes. * Membership Criteria: The definition of "members" and whether nominal members or non-voting members are eligible for inclusion remains a contentious issue. * Nature of Activities: Distinguishing between "banking" and "financing" or between "processing without power" and "with power" has led to interpretative challenges. * Applicability to Urban Co- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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