The Supreme Court ruled that KSCARDB is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949.
Facts
The issue involved in these cases is, whether, the appellant/assessee, a co-operative society, is entitled to claim deduction of the whole of its profits and gains of business attributable to the business of banking or providing credit facilities to its members who are all co-operative societies under Section 80P of the Income Tax Act, 1961.
Submissions
Senior advocate, Krishnan Venugopal, submitted that the appellant is aggrieved by the impugned orders declining to extend the benefit of deduction under Section 80P of the Act.
He submitted that sub-section (4) of Section 80P is in the nature of an exception which was added subsequently to Section 80P and the said sub-section excludes a ‘co-operative bank’ from the benevolent provision.
ASG, N. Venkataraman, appearing for the respondents, contended that the appellant is “a co-operative bank” and not simply a land mortgage bank. That Section 80P(2)(a)(i) of the Act applies to a co-operative society engaged in carrying on business of banking or providing credit facilities to its members.
He submitted that the appellant herein is engaged in the business of banking and is a co-operative bank within the meaning of Part V of the BR Act, 1949 and the argument of the appellant that it is not a cooperative bank, is incorrect.
Decision
The division bench of Justice B.V. Nagarathna and Justice Ujjal Bhuyan observed that when the definition of “co-operative bank” in Section 56 of BR Act, 1949 is viewed in terms of Sections 2(u) of the NABARD Act, 1981, it is clear that only a state co-operative bank would be within the scope and meaning of a banking company under Section 2(c) of the BR Act, 1949 on obtaining licence under Section 22 of the said Act.
The court said that although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949.
The bench held that the appellant is entitled to the benefit of deduction under Section 80P of the Act.