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 Tribunal (‘ITAT’). 4017 from the Registrar of Co-operative Societies, Trivandrum, 3 recognizing it as a co-operative Central Land Mortgage Bank incorporated on the basis of limited liability under Section 10 of the State Act, 1951 (X of 1952). The appellant/assessee being the Kerala State Co-operative Agricultural and Rural Development Bank Ltd., Thiruvananthapuram, is also included in Schedule I of the State Act, 1969 as regards the application of the Section 80(3A) thereof that postulates that when direct recruitments ‘is resorted to’ the same ‘shall be made from a select list of candidates furnished by the Kerala Public Service Commission.’ 6. Section 2(a) of the State Act, 1984 defines “Agricultural and Rural Development Bank” to mean “the Kerala Co-operative Central Land Mortgage Bank Limited, registered under Section 10 of the State Act, 1951 (X of 1952), and provides that the same shall be known as the “Kerala State Co-operative Agricultural and Rural Development Bank Limited” which is the name of the appellant herein.
The Assessing Officer observed that with effect from 01.04.2007, Section 80P was amended by the insertion of sub-section (4) as per which the provisions of Section 80P shall not apply to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The appellant/assessee may have earlier been a land mortgage bank but by virtue of a shift in its activities has become a development bank and is now governed by the State Act, 1984 and thus, it is in the business of banking as it satisfies all the tests that are required to qualify as a “co-operative bank”. The ITAT vide Order dated 23.02.2011 partly allowed the appeal and held that the appellant/assessee is a co-operative bank and is not a primary agricultural credit society or a primary co-operative agricultural and rural development bank and is consequently hit by the provision of Section 80P (4), thus, the deduction claimed was rightly 7 denied. The issue raised by the appellant/assessee was with respect to the ITAT’s finding that the appellant/assessee was neither a primary agricultural credit society nor a primary co-operative agricultural and rural development bank, hence, not entitled for exemption of its income under Section 80P(2)(a)(i) 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. That on the enactment of the State Act, 1984, Section 2(a) thereof defines “agricultural and rural development bank” to mean the Kerala Co-operative Central Land Mortgage Bank Limited, registered under Section 10 of the State Act, 1951 which is known as “Kerala State Co-operative Agricultural and Rural Development Bank Limited”. Referring to Explanation (a) to sub-section (4) of Section 80P of the Act which states that a co-operative bank shall have the same meaning assigned to it in Part V of the Banking Regulation Act, 1949 (hereinafter referred to as “BR Act, 1949”, for the sake of convenience), Part V of the BR Act, 1949 which applies to co-operative banks was adverted to. That if an entity is engaged in banking business then it would be construed as referring to a co-operative bank in which case, under Section 22 of the BR Act, 1949, it is necessary for a company to hold a licence issued by the Reserve Bank if it has to carry on banking business in India and such licence is issued subject to such conditions as the Reserve Bank may think fit to impose. That only a co-operative society which is engaged in the business of banking and is a co-operative bank within the meaning of Part V of the BR Act, 1949 would come within the scope of the exclusion under sub-section (4) of Section 80P of the Act. That in the instant case, the appellant does not hold any licence as per Section 22 of the BR Act, 1949 and in fact such a licence is not required for the appellant to conduct its business as the appellant is not conducting banking business within the meaning of BR Act, 1949. It was next contended that the judgment of this Court in Mavilayi Service Co-operative Bank Limited vs Commissioner of Income Tax, Calicut, (2021) 7 SCC 90 (“Mavilayi Service Co-operative Bank”) squarely applies to the case of the appellant inasmuch as, in the said judgment, the touchstone, on the basis of which an entity could be considered to be a co-operative bank or not within the meaning of provision of BR Act, 1949, has been elucidated. According to learned ASG, the status of the appellant is in dispute, as, according to the respondent, the appellant is a co-operative bank while the appellant has contended that it is not doing banking business and therefore is not a co-operative bank but is a co-operative credit society. In this regard, learned ASG submitted that any central or state co- operative bank is a co-operative bank within the meaning of Section 56 of BR Act, 1949 as it is engaged in banking business. That the appellant is also not a state co-operative bank whose primary object is the financing of other co-operative societies within the state as per Section 2(u) of the NABARD Act, 1981. That on a reading of Section 42(1)(d) it becomes clear that a scheduled bank is distinct from a state co-operative bank as well as a co-operative bank inasmuch as the aggregate of the liabilities of a scheduled bank which is not a state co-operative bank shall be reduced by the aggregate of the liabilities of such co-operative bank and other bank or institutions to a scheduled bank.
Varghese”) wherein the definition of co-operative bank as per section 56(cci) of the BR Act, 1949 was considered with particular reference to paragraphs 7 and 8, to contend that the Kerala State Co- operative Bank is a state co-operative bank as defined under the provisions of the NABARD Act, 1981 and the district co-operative banks are central co-operative banks as defined in that Act. It was further submitted that the appellant herein is Kerala State Co-operative Agricultural and Rural Development Bank which is as defined in Section 2(ra) of the State Act, 1969 and which is an apex bank having only primary co-operative agricultural and rural development banks as its members as defined under Section 2(oc) of the State Act, 1969 and functioning in accordance with the State Act, 1984. Having heard learned senior counsel for the petitioner and learned ASG for the respondent, the following points would arise for our consideration: i) Whether the appellant is a “co-operative bank” within the meaning of sub-section (4) of Section 80P of the Act?
(2) The sums referred to in sub-section (1) shall be the following, namely :— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or (ii) a cottage industry, or (iii) the marketing of the agricultural produce of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment In connection 19 therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities ; Provided that in the case of a co-operative society falling under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting (ii) in any other case, fifty thousand rupees. (3) In a case where the assessee is entitled also to the deduction under section 80HH or section 80HHA or 21 section 80HHB or section 80HHC, or section 80HHD or section 80- 1 or section 80-IA or section 80J, or section 80JJ, the deduction under sub- section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub- section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80HH, section 80HHA, section 80HHB, section 80HHC, section 80HHD, section 80- 1, section 80-IA, section 80J and 80JJ. – For the purposes of this sub-section,- (a) “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned to them in Part V of the Banking Regulation Act, 1949 (10 of 1949); (b) “primary co-operative agricultural and rural development bank” means a 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. Interpretation.— In this Act, unless there is anything repugnant in the subject or context, X X X (b) “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise; (c) “banking company” means any company which transacts the business of banking in India. (2) Every banking company in existence on the commencement of this Act, before the expiry of six months from such commencement, and every other company before commencing banking business in India, shall apply in writing to the Reserve Bank for a licence under this section: Provided that in the case of a banking company in existence on the commencement of this Act, nothing in sub-section (1) shall be deemed to prohibit the company from carrying on banking business until it is granted a licence in pursuance of this section or is by notice in writing informed by the Reserve Bank that a licence cannot be granted to it: 23 Provided further that the Reserve Bank shall not give a notice as aforesaid to a banking company in existence on the commencement of this Act before the expiry of the three years referred to in sub-section (1) of section 11 or of such further period as the Reserve Bank may under that sub-section think fit to allow. (3) Before granting any licence under this section, the Reserve Bank may require to be satisfied by an inspection of the books of the company or otherwise that the following conditions are fulfilled, namely:— (a) that the company is or will be in a position to pay its present or future depositors in full as their claims accrue; (b) that the affairs of the company are not being, or are not likely to be, conducted in a manner deterimental to the interests of its present or future depositors; (c) that the general character of the proposed management of the company will not be prejudicial to the public interest or the interest of its depositors; (d) that the company has adequate capital structure and earning prospects; (e) that the public interest will be served by the grant of a licence to the company to carry on banking business in India; (f) that having regard to the banking facilities available in the proposed principal area of operations of the company, the potential scope for expansion of banks already in existence in the area and other relevant factors the grant of the licence would not be prejudicial to the operation and consolidation of the banking system consistent with monetary stability and economic growth; (g) any other condition, the fulfilment of which (4) The Reserve Bank may cancel a licence granted to a banking company under this section — (i) if the company ceases to carry on banking business in India; or (ii) if the company at any time fails to comply with any of the conditions imposed upon it under sub-section (1); or (iii) if at any time, any of the conditions referred to in sub- section (3) and sub-section (3A) is not fulfilled: Provided that before cancelling a licence under clause (ii) or clause (iii) of this sub-section on the ground that the banking company has failed to comply with or has failed to fulfil any of the conditions referred to therein, the Reserve Bank, unless it is of opinion that the delay will be prejudicial to the interests of the company’s depositors or the public, shall grant to the company on such terms as it may specify, an opportunity of taking the necessary steps for complying with or fulfilling such condition. (6) The decision of the Central Government where an appeal has been preferred to it under sub-section (5) or of the Reserve Bank where no such appeal has been preferred shall be final.
Act to apply to co-operative societies subject to modifications.—The provisions of this Act, as in force for 25 the time being, shall apply to, or in relation to, co-operative societies as they apply to, or in relation to, banking companies subject to the following modifications, namely:— (a) throughout this Act, unless the context otherwise requires,— (i) references to a “banking company” or “the company” or “such company” shall be construed as references to a co-operative bank, (ii) references to “commencement of this Act” shall be construed as references to commencement of funds of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965); (b) in section 2, the words and figures “the Companies Act, 1956 (1 of 1956), and” shall be omitted; (c) in section 5— ( i ) after clause ( cc ), the following clauses shall be inserted namely:— (cci) “co-operative bank” means a state co-operative bank, a central co-operative bank and a primary co-operative bank; (ccii) “co-operative credit society” means a co Explanation.—If any dispute arises as to the primary object or principal business of any co-operative society referred to in clauses ( cciv ), ( ccv ) and ( ccvi ), a determination thereof by the Reserve Bank shall be final; (ccvii) “central co-operative bank”, “primary rural credit society” and “state co-operative bank” shall have the meanings respectively assigned to them in the National Bank for Agriculture and Rural Development Act, 1981 (61 of 1981);” X X X (o) in section 22,— (i) for sub-sections (1) and (2) the following sub- sections shall be substituted, namely:— 28 “(1) Save as hereinafter provided, no co-operative society shall carry on banking business in India unless— (a) [***] (b) it is a co-operative bank and holds a licence issued in that behalf by the Reserve Bank, subject to such conditions, if any, as the Reserve Bank may deem fit to impose: Provided that nothing in this sub-section shall apply to a co-operative society, not being a primary credit society or a co-operative bank carrying on banking business at the commencement of the Banking Laws ( (2) Every co-operative society carrying on business as a co-operative bank at the commencement of the Banking Laws (Application to Co-operative Societies) Act, 1965 (23 of 1965) shall before the expiry of three months from the commencement, every co-operative bank which comes into existence as a result of the division of any other co-operative society carrying on business as a co-operative bank, or the amalgamation of two or more co-operative societies carrying on banking business shall, before the expiry of three months from its so coming into existence, every primary credit society which had become a primary co-operative bank on or before the commencement of the Banking Laws (Amendment) Act, 2012, shall before the expiry of three months from the date on which it had become a primary co-operative bank and every co-operative shall before commencing banking 29 business in India, apply in writing to the Reserve Bank for a licence under this section: Provided that nothing in clause (b) of sub-section (1) shall be deemed to prohibit— (i) a co-operative society carrying on business as a co-operative bank at the commencement of the Banking Law (Application to Co-operative Societies) Act, 1965 (23 of 1965); or (ii Definitions.- In this Act, unless the context otherwise requires, – 30 X X X (d) “central co-operative bank” means the principal co- operative society in a district in a State, the primary object of which is the financing of other co-operative societies in that district: Provided that in addition to such principal society in a district, or where there is no such principal society in a district, the State Government may declare any one or more cooperative societies carrying on the business of financing other co-operative societies in that district to be also or to be a central co-operative bank or central co-operative banks within the meaning of this definition; X X X (u) “State co-operative bank” means the principal co- operative society in a State, the primary object of which is the financing of other co-operative societies in the State: Provided that in addition to such principal society in a State, or where there is no such principal society in a State, the State Government may declare any one or more cooperative societies carrying on business in that State to be also or to be a State cooperative bank or State co-operative banks within the meaning of this definition; (v) “State land
Definitions.- In this Act, unless the context otherwise requires— X X X (g) “co-operative society with limited liability” means a society in which the liability of its members for the debts of the society in the event of its being wound up is limited by its bye-laws- (i) to the amount, if any, unpaid on the shares respectively held by them; or (ii) to such amount as they may, respectively, undertake to contribute to the assets of the society; X X X (ia) District Co-operative Bank” means a Central Society having jurisdiction over one revenue district and 32 having as its members Primary Agricultural Credit Societies, Urban Co-operative Banks and the principal object of which is to raise funds to be lent to its members, including nominal or associate members, which existed under this Act, immediately before the commencement of the Kerala Co-operative Societies (Amendment) Act, 2019 and which has ceased to exist after the commencement of the said Amendment Act.” X X X (oc) “Primary Co-operative Agricultural and Rural Development Bank” means a 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 (2)Notwithstanding the repeal of the Madras Co-operative Societies Act, 1932 and the Travancore-Cochin Co- operative Societies Act, 1951 and without prejudice to the 33 provisions of sections 4 and 23 of the Interpretation and General Clauses Act, 1125 (VII of 1125),— (i) all appointments, rules and orders made, notifications and notices issued, and suits and other proceedings instituted,under any of the Acts hereby repealed shall, so far as may be, be deemed to have been respectively made, issued and instituted under this Act; (ii) any society existing in the State on the date of the commencement of this Act which has been registered or deemed to be registered under any of the aforesaid repealed Acts shall be deemed to be registered under this Act, and the bye-laws of such society shall, so far as they are not inconsistent with the provisions of this Act, continue in force until altered or rescinded.” vi) The Kerala State Co-Operative Agricultural Development Banks Act, 1984 (State Act, 1984): The relevant provisions of the State Act, 1984 are extracted as under for immediate reference: “(2) Definitions.- In this Act, unless the context otherwise requires,- (a) For cooperative societies working in more than one State, the Multi-State Cooperative Societies Act, 1984 was enacted by Parliament under Schedule VII List I Entry 44 of the Constitution.
Incorporation, regulation and winding up of corporations, other than those specified in List I, and universities; unincorporated trading, literary, scientific, religious and other societies and associations; co-operative societies.” b) This Court in Union of India vs Rajendra N. Thus, unless a co-operative society is a state co- operative bank or a central co-operative bank or a primary co-operative bank as defined under NABARD Act, 1981, no licence can be issued by Reserve Bank of India. However, if a co- operative society is not a primary credit society, then, to carry on banking business, it must be a co-operative bank and hold a licence issued by Reserve Bank of India. While considering the definition of co-operative society and state co- operative bank under Section 2(f) and Section 2(u) respectively of the NABARD Act, 1981, it was observed that under the NABARD Act, 1981, co-operative society is a society which is registered or deemed to be registered under the Co-operative Societies Act, 1912 or any other law relating to co-operative societies for the time being in force in any State. While interpreting Section 2(f) of the NABARD Act, 1981 which defines co-operative society, 38 this Court held that it is only co-operative societies registered under local or State laws relating to co-operative societies which would be covered under the said definition. It was also observed that use of words “Co-operative Societies Act, 1912” in the NABARD Act, 1981 also indicates that the definition is restricted to societies registered under the law relating to co-operative societies in the State in which they want to operate. Before 39 such a declaration can be made, the State Government must necessarily be satisfied- (a) that it is a principal co-operative society in the State; (b) that it is carrying on business in the State; and (c) that the business is of financing other co-operative societies in that State. Varghese, while considering Section 56 of the BR Act, 1949 in the context of co-operative bank which has been defined to mean a state co-operative bank, a central co-operative bank and a primary co- operative bank which have been assigned the definitions under NABARD Act, 1981 and while considering the definitions of clause (u) and (d) in Section 2 of NABARD Act, 1981, it was observed, inter alia, that a state co-operative bank is one defined in Section 2(rb) of the State Act, to mean an apex society having only district co-operative banks as its members. Therefore, Kerala State Co-operative Bank is a “state co-operative bank” as defined in the NABARD Act, 1981 and the district co-operative banks are central co-operative banks as defined in that Act.
vs Commissioner of Income Tax, (2017) 9 SCC 364 (“Citizen Co-operative Society Ltd.”), appellant therein was a co-operative society which was denied benefit of Section 80P on the ground that it is a co-operative society of the nature covered by sub-section (4) of Section 80P of the Act and, therefore, disentitled to get the benefit. Assessing officer held that the deduction in respect of income of co-operative societies under Section 80P of the Act was not admissible to the appellant therein as the said appellant was carrying on banking business for the public at large and for all practical purposes, it was acting like a co-operative 42 bank governed by the BR Act, 1949 and its operation was not only confined to its members but outsiders as well. Therefore, all those co-operative societies which fall within the purview of the Section 80P of the Act are entitled to deduction in respect of any income referred to in sub-section (2) thereof. Sub-section (4) of Section 80P 43 inserted by the Finance Act, 2006 is in the nature of a proviso and such a deduction under the said Section shall not be admissible to a co- operative bank. f) In Mavilayi Service Co-operative Bank, the appeals before this Court were filed by the co-operative societies which had been registered as “primary agricultural credit societies”, together with one “multi-state 44 co-operative society” raising the question as to, whether, deductions could be claimed under Section 80P(2)(a)(i) of the Act and in particular, whether the assessees are entitled to such deductions after the introduction of Section 80P(4) of the Act by Section 19 of the Finance Act, 2006 with effect from 01.04.2007. The Full Bench of the Kerala High Court ultimately held that if the assessee – societies ceased to be specific class of society for which deduction is provided, by reason of sub-section (4) of Section 80P of the Act the deduction could not be allowed. was correctly read by the Full Bench of the Kerala High Court which is to the effect that the Assessing Officer must assess the real facts of a case in order to conclude as to whether activities of a primary agricultural credit society were, in fact, being carried out in the assessment year in question for which such an entity must adduce facts to show that it is in fact carrying on its business as a primary agricultural credit society in the assessment year in question. This Court considered the definition of co-operative society under clause (19) of Section 2 of the Act in the context of Section 80P of the Act, specially in light of sub-section (4) thereof as well as Sections 3 and 56 of the BR Act, 1949 and the provisions of State Act, 1969 as well as the bye-laws of some of the societies and observed in paragraph 18 as under: 46 “ 18. That once the assessee is entitled to avail of deduction, the entire amount of profits and gains of business that are attributable to any one or more activities mentioned in sub-section (2) of Section 80-P must be given by way of deduction; 24.3. This is for the reason that when the legislature wanted to restrict the deduction to a particular type of cooperative society, such as is evident from Section 80-P(2)( b ) qua milk cooperative societies, the legislature expressly says so — which is not the case with Section 80-P(2)( a )( i ) 24.5.
Therefore Section 80-P has been amended and a new sub-section (4) has been inserted to provide that the provisions of the said section shall not apply in relation to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. In this regard, I have been directed to state that sub-section (4) of Section 80-P provides that deduction under the said section shall not be allowable to any cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank. Thus, if the Banking Regulation Act, 49 1949 is now to be seen, what is clear from Section 3 read with Section 56 is that a primary cooperative bank cannot be a primary agricultural credit society, as such cooperative bank must be engaged in the business of banking as defined by Section 5(b) of the Banking Regulation Act, 1949, which means the accepting, for the purpose of lending or investment, of deposits of money from the public.
As a matter of fact, some primary agricultural credit societies applied for a banking licence to RBI, as their bye-laws also contain as one of the objects of the Society the carrying on of the business of banking. RCS will issue the necessary guidelines in this regard.” Consequently, the judgment of the Full Bench of the Kerala High Court was set aside by observing that Section 80P of the Act, being a 50 benevolent provision enacted by Parliament to encourage and promote the credit of co-operative sector in general must be read liberally and reasonably, and if there is any ambiguity, favour of the assessee. , it was categorically held that under Section 56 of the BR Act, 1949 only three co-operative banks have been defined, namely, state co-operative bank, central co-operative bank and primary co- 51 operative bank which are covered under Section 56 (cci) read with (ccvii) read with the provisions of the NABARD Act, 1981. If any bank does not fall within the nomenclature of the aforesaid three banks as defined under the NABARD Act, 1981, it would not be a co-operative bank within the meaning of Section 56 irrespective of BR Act, 1949 of whatever nomenclature it may have or structure it may possess or incorporated under any Act.
Further, in the case of Mavilayi Service Co-operative Bank, this Court observed that a co-operative bank would engage in banking business on obtaining a licence under Section 22(1b) of the BR Act, 1949. This is because sub-section (4) of Section 80P is in the nature of a proviso to the main provision contained in sub- sections (1) and (2) of Section 80P. iv) Fourthly, sub-clause (2)(a)(i) speaks of a co-operative society being “engaged in”, inter alia, carrying on the business of banking or providing credit facilities to its members. 54 viii) Eighthly, sub-clause (d) states that where interest or dividend income is derived by a co-operative society from investments with other co-operative societies, the whole of such income is eligible for deduction, the object of the provision being furtherance of the co-operative movement as a whole. Also under Section 22(1)(b) of the BR Act, 1949, no co- operative society can carry on banking business in India, unless it is a co-operative bank and holds a licence issued in that behalf by Reserve Bank of India. Section 80P speaks about deduction in respect of income of co- operative societies from the gross total income referred to in sub-section (2) of the said Section.
Sub-section (4) of Section 80P in the present form is in the nature of an exception which states that the provisions of Section 80P shall apply in relation to any co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. Having regard to the Explanation to sub-section (4) of Section 80P, it is necessary to consider Chapter V of the BR Act, 1949 which states that the said Act shall apply to co-operative societies subject to modifications made thereunder. Section 56 begins with a non-obstante clause and states that notwithstanding anything contained in any other law for the time being in force, the provisions of the said Act shall apply to, or in relation to, co-operative societies as they apply to, or in relation to banking companies subject to the following modifications, namely, • in clause (a) throughout the said Act, unless the context otherwise requires,- (i) references to a “banking company” or “the company” or “such company” shall be construed as references to a co- operative bank. • in clause (c), it is stated that in Section 5 as per clause (cci), “co- operative bank” means a state co-operative bank, a central co- operative bank and a primary co-operative bank. Further, Section 2(d) of NABARD Act, 1981 defines central co- operative bank while Section 2(u) defines a state co-operative bank to mean the principal co-operative society in a State, the primary object of which is financing of other co-operative societies in the State which 59 means, it is in the nature of an apex co-operative bank having regard to the definition under Section 56 of the BR Act, 1949, in relation to co- operative bank. Section 2(x) of the said Act states that words and expressions used in the NABARD Act, 1981 and not defined either in the said Act or in the RBI Act, but defined in the BR Act, 1949, shall have the meanings respectively assigned to them in the BR Act, 1949.
When the RBI Act is perused, it is noted that clause (i) of Section 2 defines “co- operative bank”, “co-operative credit society”, “director”, “primary agricultural credit society”, “primary co-operative bank” and “primary credit society” to have the meanings respectively assigned to them in Part V of the BR Act, 1949. Thus, co-operative bank shall be construed as references to a banking company and when the definition of banking 61 company in clause (c) of Section 5 of the BR Act, 1949 is seen, it means any company which transacts the business of banking in India and as already noted banking business is defined in clause (b) of Section 5 to mean the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise. In other words, if a co-operative society is not conducting the business of banking as defined in clause (b) of Section 5 of the BR Act, 1949, it would not be a co-operative bank and not so within the meanings of a state co-operative bank, a central co-operative bank or a primary co-operative bank in terms of Section 56(c)(i)(cci). If a co-operative society is not a co-operative bank, then such an entity would be entitled to deduction but on the other hand, if it is a co-operative bank within the meaning of Section 56 of BR Act, 1949 read with the provisions of NABARD Act, 1981 then 62 not be entitled to the benefit of deduction under sub-section (4) of Section 80P of the Act. Further, while considering the definition of a co-operative bank under Section 56(cci) of the BR Act, 1949, to mean a state co- operative bank, a central co-operative bank and a primary co-operative 63 bank which is defined in (ccviii) thereof, to have meanings respectively assigned to them in the NABARD Act, 1981 would imply that if a state co-operative bank is within the meaning of NABARD Act, 1981 then it would be excluded from the benefit under Section 80P of the Act. Looked at from another angle, a co-operative society which is not a state co-operative bank within the meaning of NABARD Act, 1981 would not be a co-operative bank within the meaning of Section 56 of the BR Act, 1949. Further, under the provisions of the State Act, 1984, ‘agricultural and rural development bank’ means the Kerala Co- operative Central Land Mortgage Bank Limited, registered under Section 10 of the Travancore-Cochin Co-operative Societies Act, 1951, which shall be known as Kerala State Co-operative Agricultural and Rural Development Bank Limited i.e. 65 Conclusion: In the instant case, although the appellant society is an apex co- operative 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.
Case Title: KERALA STATE CO-OPERATIVE AGRICULTURAL AND RURAL DEVELOPMENT BANK LTD. KSCARDB VS. THE ASSESSING OFFICER, TRIVANDRUM AND ORS.
Case Number: CIVIL APPEAL NO(S).10069 OF 2016 (2023INSC830)
