KERALA STATE CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD. KSCARDB vs. THE ASSESSING OFFICER, TRIVANDRUM

C.A. No.-010069-010069 - 2016Supreme Court2023 INSC 83014 September 2023Bench: HON'BLE MRS. JUSTICE B.V. NAGARATHNA HON'BLE MR. JUSTICE UJJAL BHUYANAuthor: HON'BLE MRS. JUSTICE B.V. NAGARATHNA65 pages
For Petitioner: BIJU P RAMAN
AI SummaryAllowed

What were the facts?

The appellant, Kerala State Co-operative Agricultural and Rural Development Bank Ltd. (KSCARDB), is a co-operative society registered under the Kerala Co-operative Societies Act, 1969. It provides credit facilities exclusively to its member co-operative societies. For Assessment Year 2007-08, KSCARDB claimed a deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Assessing Officer disallowed the deduction of Rs. 36,39,87,058, holding that KSCARDB was a 'co-operative bank' and thus excluded by Section 80P(4). The Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal (ITAT) upheld this disallowance. The appeals challenge the judgments of the Kerala High Court, CIT(A), and ITAT.

What did the Supreme Court hold?

The Supreme Court held that the appellant, Kerala State Co-operative Agricultural and Rural Development Bank Ltd. (KSCARDB), is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the Banking Regulation Act, 1949. The Court reasoned that while KSCARDB is an apex co-operative society under the State Act, 1984, it has not been declared a state co-operative bank under the NABARD Act, 1981. The definition of a 'co-operative bank' under Section 56 of the BR Act, 1949, when read with the NABARD Act, 1981, implies that only a state co-operative bank would be considered a banking company for the purposes of the BR Act. Since KSCARDB does not fall under this definition, it is not a co-operative bank hit by Section 80P(4). Therefore, it is entitled to the benefit of deduction under Section 80P of the Act as a co-operative credit society providing financial accommodation to its members. The appeals filed by the appellant are allowed, and the orders of the Kerala High Court and other authorities to the contrary are set aside.

What were the issues?

1. 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 under Section 80P of the Income Tax Act, 1961, in light of the insertion of Section 80P(4). Assessee's Contention: The appellant contends that it is not a 'co-operative bank' as defined under Section 80P(4) of the Act, nor is it a primary agricultural credit society or a primary co-operative agricultural and rural development bank. It argues that its activities are limited to providing financial accommodation to its member co-operative societies and not to the general public, and it has not been declared a co-operative bank under the NABARD Act, 1981 or the State Act. Revenue's Contention: The revenue argues that the appellant is engaged in the business of banking and satisfies the tests for a 'co-operative bank', thus falling within the exclusion provided by Section 80P(4) of the Act. The authorities below have consistently held that the appellant is a co-operative bank.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(a)(i),Section 80P(4),Section 143(3),Section 5(b),Section 56

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
2023INSC830 REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S).10069 OF 2016 KERALA STATE CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD. KSCARDB …APPELLANT(S) VS. THE ASSESSING OFFICER, TRIVANDRUM AND ORS. ...RESPONDENT(S) WITH CIVIL APPEAL NO(S). 5005-5007 OF 2019 CIVIL APPEAL NO(S).______ OF 2023 (@SLP(C) NO(S). 2737 OF 2016) CIVIL APPEAL NO(S).______ OF 2023 (@SLP(C) NO(S). 5400 OF 2016) CIVIL APPEAL NO(S).______ OF 2023 (@SLP(C) NO(S). 26756 OF 2016) CIVIL APPEAL NO(S). 3881-3882 OF 2019

J U D G M E N T

NAGARATHNA, J.

Leave granted in those Special Leave Petitions where it has not yet been granted.

2.

These appeals arise out of analogous proceedings against the appellant/assessee, and, inter alia, impugn the judgement dated 2

26.11.

2015 passed by the Kerala High Court; the order dated 08.08.2016 passed by the Commissioner of Income Tax (Appeals), Trivandrum and the order dated 07.02.2019 passed by the Income Tax Appellate Tribu

The order continues below.

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