4 Replies
rahul
(a)
(1620 Points)
Replied 21 October 2018
1. Deduction under Section 80P
Under this section, certain specified income of a co-operative society, engaged in specified activities would be allowed as a deduction if such income is included in the gross total income of the society.
2. Meaning of Co-operative society for the purpose of Section 80P
Co-operative society is not defined specifically for the purpose of Section 80P. However, Section 2(19) of the Income-tax Act, 1961, defines Co-operative society to mean a co-operative society registered under Co-operative societies Act, 1912 or under any other law governing registration of co-operative societies in any State.
3. Activities and amount eligible for deduction under Section 80P
Activities coveredQuantum of deductionCo-operative society engaged in:100% of profits and gains attributable to these activitiesBusiness of banking or providing credit facilities to its membersCottage industryMarketing of agricultural produce grown by its membersPurchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its membersProcessing of the agricultural produce of its members without the aid of powerCollective disposal of the labour of its members or fishing or allied activities (catching, curing, processing, preserving, storing, marketing of fish etc)
However, rules and bye-laws of these co-operative societies must restrict voting rights to
Members, who are individuals who contribute their labour
Is a co-operative society which provides financial assistance to the society or
Is State Government.
Co-operative society which is primarily engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to:
A federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be
The Government or Local authority
Either Government company as per Company law or corporation established by or under Central, State or Provincial Act , which is engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public
100% of profits and gains of such businessCo-operative society engaged in any other activities
For consumer co-operative society* – Upto Rs 1 lakh
Others – Upto Rs 50,000
Co-operative society earning:
Interest or dividend from its investment with any other co-operative society or
Income from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities
100% of such incomeInterest on securities or income from house property of a Co-operative society other than:Housing society or
Urban consumers’ society** or
Society carrying on transport business or
Society engaged in manufacturing operations with the aid of power
whose gross total income is not more than Rs 25,000
* ‘Consumers’ co-operative society’ means a society for the benefit of its members
** ‘Urban consumers’ co-operative society’ means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment.
4. Specific exclusions
Finance Act 2006 introduced specific exclusion to the applicability of benefit of deduction under Section 80P. Section 80P is made not applicable to any co-operative bank (includes Regional Rural Banks) other than a primary agricultural credit society (as defined in Banking Regulation Act) or a primary co-operative agricultural and rural development bank ( society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities). Benefit of deduction is withdrawn with an intention to treat co-operative banks on par with commercial banks who do not enjoy any such tax benefit.
5. What if co-operative society is also eligible for profit linked deductions under other Sections?
If co-operative society is also eligible for profit linked deduction under Section 80HH, 80HHA, 80HHB, 80HHC, 80HHD, 80-I, 80-IA, 80J, deduction allowed under Section 80P is from gross total income after reducing deductions under these Sections.
6. Key points to be noted
Section 80P, for different scenarios, uses different terms for the purpose of deduction such as ‘profits and gains of business attributable to such activities’, ‘profits and gains of such business’, ‘profits and gains attributable to such activities’, ‘income derived’ etc. These terms need to be analysed in depth considering various commentaries on income tax and case laws.
Various High Courts have held that all Co-operative Societies other than those coming under the control of RBI are eligible for deduction. A Co-operative society carrying on banking activities is not a Co-operative Bank licensed by Reserve Bank of India. It can therefore claim deduction under 80P
Meaning of various other terms such as ‘cottage industry’, ‘marketing’, ‘members’ ‘industry’, ‘investment’ etc are also analysed in various decisions
Section 80P profit is not considered to increase adjusted total income for Alternate Minimum Tax levy
Under this section, certain specified income of a co-operative society, engaged in specified activities would be allowed as a deduction if such income is included in the gross total income of the society.
2. Meaning of Co-operative society for the purpose of Section 80P
Co-operative society is not defined specifically for the purpose of Section 80P. However, Section 2(19) of the Income-tax Act, 1961, defines Co-operative society to mean a co-operative society registered under Co-operative societies Act, 1912 or under any other law governing registration of co-operative societies in any State.
3. Activities and amount eligible for deduction under Section 80P
Activities coveredQuantum of deductionCo-operative society engaged in:100% of profits and gains attributable to these activitiesBusiness of banking or providing credit facilities to its membersCottage industryMarketing of agricultural produce grown by its membersPurchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its membersProcessing of the agricultural produce of its members without the aid of powerCollective disposal of the labour of its members or fishing or allied activities (catching, curing, processing, preserving, storing, marketing of fish etc)
However, rules and bye-laws of these co-operative societies must restrict voting rights to
Members, who are individuals who contribute their labour
Is a co-operative society which provides financial assistance to the society or
Is State Government.
Co-operative society which is primarily engaged in supplying milk, oilseeds, fruits or vegetables raised or grown by its members to:
A federal co-operative society, being a society engaged in the business of supplying milk, oilseeds, fruits, or vegetables, as the case may be
The Government or Local authority
Either Government company as per Company law or corporation established by or under Central, State or Provincial Act , which is engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public
100% of profits and gains of such businessCo-operative society engaged in any other activities
For consumer co-operative society* – Upto Rs 1 lakh
Others – Upto Rs 50,000
Co-operative society earning:
Interest or dividend from its investment with any other co-operative society or
Income from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities
100% of such incomeInterest on securities or income from house property of a Co-operative society other than:Housing society or
Urban consumers’ society** or
Society carrying on transport business or
Society engaged in manufacturing operations with the aid of power
whose gross total income is not more than Rs 25,000
* ‘Consumers’ co-operative society’ means a society for the benefit of its members
** ‘Urban consumers’ co-operative society’ means a society for the benefit of the consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment.
4. Specific exclusions
Finance Act 2006 introduced specific exclusion to the applicability of benefit of deduction under Section 80P. Section 80P is made not applicable to any co-operative bank (includes Regional Rural Banks) other than a primary agricultural credit society (as defined in Banking Regulation Act) or a primary co-operative agricultural and rural development bank ( society having its area of operation confined to a taluk and the principal object of which is to provide for long-term credit for agricultural and rural development activities). Benefit of deduction is withdrawn with an intention to treat co-operative banks on par with commercial banks who do not enjoy any such tax benefit.
5. What if co-operative society is also eligible for profit linked deductions under other Sections?
If co-operative society is also eligible for profit linked deduction under Section 80HH, 80HHA, 80HHB, 80HHC, 80HHD, 80-I, 80-IA, 80J, deduction allowed under Section 80P is from gross total income after reducing deductions under these Sections.
6. Key points to be noted
Section 80P, for different scenarios, uses different terms for the purpose of deduction such as ‘profits and gains of business attributable to such activities’, ‘profits and gains of such business’, ‘profits and gains attributable to such activities’, ‘income derived’ etc. These terms need to be analysed in depth considering various commentaries on income tax and case laws.
Various High Courts have held that all Co-operative Societies other than those coming under the control of RBI are eligible for deduction. A Co-operative society carrying on banking activities is not a Co-operative Bank licensed by Reserve Bank of India. It can therefore claim deduction under 80P
Meaning of various other terms such as ‘cottage industry’, ‘marketing’, ‘members’ ‘industry’, ‘investment’ etc are also analysed in various decisions
Section 80P profit is not considered to increase adjusted total income for Alternate Minimum Tax levy
Sumithra Shetty
(Still studyig)
(56 Points)
Replied 22 October 2018
renting of godwans can claim deduction or not
Nikhil Joshi
(Chartered Accountant)
(54 Points)
Replied 27 March 2022
While filing ITR 5 online, schedule for claiming deduction under section 80 P for cooperative housing society as assessee is not editable. It seems deduction under section 80P is not applicable for cooperative housing society for certain income in the form of interest received on their fixed deposits with any other cooperative banks. But after reading various opinions it seems cooperative housing society is entitled to claim that amount as deduction. Kindly help me to know actual position of cooperative housing society in terms of claiming deduction under section 80P from interest income received from any other cooperative banks. thanks in advance
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