I have received a s.148A(b) notice and a s.148A(d) order saying my society's s.80P(2)(d) deduction on interest from a co-operative bank has escaped assessment. Can I challenge the notice itself rather than fight through the reassessment?
In this case yes. The Madras High Court, in writ petitions against s.148A(b) notices, s.148A(d) orders and s.148 notices, held that a co-operative society registered under the State Co-operative Societies Act remains a co-operative society within s.2(19) whether or not it carries on banking, so interest from a co-operative bank qualifies under s.80P(2)(d); because the impugned orders were passed without considering that, they were set aside and the notices quashed.
Decided by the High Court (Krishnan Ramasamy J) on 2023-10-10, reported as W.P. Nos. 11172, 11174, 11177 and 11180 of 2023 and W.M.P. Nos. 11034, 11038, 11044 and 11048 of 2023 (High Court of Judicature at Madras). It bears on section 80P(2)(d), section 2(19), section 147, section 148, section 148A of the Income Tax Act 1961, in Co-operative Societies, Deductions & Disallowances and Reassessment & Reopening matters.
Two things make this useful. The first is the substance: it puts the Madras High Court on the same side of the s.80P(2)(d) split as the Gujarat High Court and as the January 2017 Karnataka decision, against the June 2017 Karnataka decision the library already carries — so the split is now across at least three States as well as inside Karnataka. The reasoning is short and statutory: s.2(19) defines a co-operative society by registration, so a co-operative bank registered under a State Co-operative Societies Act is a co-operative society, 'be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank'. The Revenue's contrary argument, that an RBI banking licence and dealings with the general public strip the entity of its co-operative society character, was not accepted. The second is procedural: the Court entertained writ petitions against reassessment notices and quashed them rather than leaving the society to the statutory route, because the reasons proceeded on a legal position the Court held to be wrong. That is a real option where a s.148A(d) order rests on nothing but the disputed construction of s.80P(2)(d), though it is a discretionary jurisdiction and no assessee should count on it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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Two urban co-operative credit societies at Vellore had made investments with a co-operative bank and received interest, on which they claimed deduction under s.80P(2)(d). The Income Tax Officer issued notices under s.148A(b) dated 3 March 2023 for assessment years 2016-17 and 2017-18, passed orders under s.148A(d) dated 28 and 31 March 2023, and issued notices under s.148 of the same dates, on the footing that the deduction in s.80P(2)(d) is available only for income and interest received from a co-operative society and not from a co-operative bank. The societies filed writ petitions under Article 226 for certiorarified mandamus to quash the notices and orders and to forbear reassessment. For the Revenue it was argued that the Reserve Bank of India had granted a banking licence to the co-operative bank, that the bank therefore provided services not only to members of a co-operative society but to the general public, and that it had accordingly lost the status of a co-operative society; reliance was placed on Totgars Co-operative Sale Society v. Income Tax Officer. The societies produced the certificate of incorporation showing that the co-operative bank was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20 May 2003.
The writ petitions were allowed and all the impugned notices set aside, with no costs. Section 80P(2)(d) allows the whole of the interest or dividend derived by a co-operative society from its investment with any other co-operative society; 'co-operative society' is defined in s.2(19) by reference to registration under the Co-operative Societies Act 1912 or any other State law for the registration of co-operative societies, so a co-operative society referred to there is any society so registered, whether it carries on banking business or other businesses, and a co-operative bank so registered is within it. The Supreme Court's decision in Totgars was held inapplicable because eligibility here had to be decided under s.80P(2)(d) and not under s.80P(2)(a)(i). Because the impugned orders had been passed without considering these aspects, they could not stand.
The Court extracted s.80P(2)(d) and observed that if a co-operative society derives income by way of interest from an investment made in any other co-operative society, the whole of that interest is eligible for deduction, so that the only question was whether a co-operative bank falls within the term 'co-operative society'. It found that the petitioners had produced the certificate of incorporation showing that the bank in which they had invested was registered under the Tamil Nadu Co-operative Societies Act, 1983, and then set out the definition in s.2(19). Reading the definition, it held that a co-operative society for this purpose is simply a society registered under a co-operative societies law, whatever business it carries on. It rejected the Revenue's reliance on Totgars as a decision under s.80P(2)(a)(i), and referred to a Division Bench decision of the same Court in Commissioner of Income Tax, Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd., decided on 10 August 2016 after considering the 2010 Supreme Court decision, in which the Division Bench had held the society entitled to the benefit under s.80P(2)(d). Since the impugned orders had been passed without considering all these aspects, they were liable to be set aside.
Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank.
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Handle my notice → Ask a CA on WhatsAppIn this case yes. The Madras High Court, in writ petitions against s.148A(b) notices, s.148A(d) orders and s.148 notices, held that a co-operative society registered under the State Co-operative Societies Act remains a co-operative society within s.2(19) whether or not it carries on banking, so interest from a co-operative bank qualifies under s.80P(2)(d); because the impugned orders were passed without considering that, they were set aside and the notices quashed. This was decided by the High Court (Krishnan Ramasamy J) and bears on section 80P(2)(d), section 2(19), section 147, section 148, section 148A of the Income Tax Act 1961. It is reported as W.P. Nos. 11172, 11174, 11177 and 11180 of 2023 and W.M.P. Nos. 11034, 11038, 11044 and 11048 of 2023 (High Court of Judicature at Madras). Two things make this useful. The first is the substance: it puts the Madras High Court on the same side of the s.80P(2)(d) split as the Gujarat High Court and as the January 2017 Karnataka decision, against the June 2017 Karnataka decision the library already carries — so the split is now across at least three States as well as inside Karnataka. The reasoning is short and statutory: s.2(19) defines a co-operative society by registration, so a co-operative bank registered under a State Co-operative Societies Act is a co-operative society, 'be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank'. The Revenue's contrary argument, that an RBI banking licence and dealings with the general public strip the entity of its co-operative society character, was not accepted. The second is procedural: the Court entertained writ petitions against reassessment notices and quashed them rather than leaving the society to the statutory route, because the reasons proceeded on a legal position the Court held to be wrong. That is a real option where a s.148A(d) order rests on nothing but the disputed construction of s.80P(2)(d), though it is a discretionary jurisdiction and no assessee should count on it. If it applies to you, the first step is this: Put the certificate of registration of the co-operative bank under the State Co-operative Societies Act on record with the reply to the s.148A(b) notice. That document is what the Court relied on.
Two urban co-operative credit societies at Vellore had made investments with a co-operative bank and received interest, on which they claimed deduction under s.80P(2)(d). The Income Tax Officer issued notices under s.148A(b) dated 3 March 2023 for assessment years 2016-17 and 2017-18, passed orders under s.148A(d) dated 28 and 31 March 2023, and issued notices under s.148 of the same dates, on the footing that the deduction in s.80P(2)(d) is available only for income and interest received from a co-operative society and not from a co-operative bank. The societies filed writ petitions under Article 226 for certiorarified mandamus to quash the notices and orders and to forbear reassessment. For the Revenue it was argued that the Reserve Bank of India had granted a banking licence to the co-operative bank, that the bank therefore provided services not only to members of a co-operative society but to the general public, and that it had accordingly lost the status of a co-operative society; reliance was placed on Totgars Co-operative Sale Society v. Income Tax Officer. The societies produced the certificate of incorporation showing that the co-operative bank was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20 May 2003. The matter was decided on 2023-10-10 by the High Court (Krishnan Ramasamy J). On those facts the High Court held as follows. The writ petitions were allowed and all the impugned notices set aside, with no costs. Section 80P(2)(d) allows the whole of the interest or dividend derived by a co-operative society from its investment with any other co-operative society; 'co-operative society' is defined in s.2(19) by reference to registration under the Co-operative Societies Act 1912 or any other State law for the registration of co-operative societies, so a co-operative society referred to there is any society so registered, whether it carries on banking business or other businesses, and a co-operative bank so registered is within it. The Supreme Court's decision in Totgars was held inapplicable because eligibility here had to be decided under s.80P(2)(d) and not under s.80P(2)(a)(i). Because the impugned orders had been passed without considering these aspects, they could not stand.
The Court extracted s.80P(2)(d) and observed that if a co-operative society derives income by way of interest from an investment made in any other co-operative society, the whole of that interest is eligible for deduction, so that the only question was whether a co-operative bank falls within the term 'co-operative society'. It found that the petitioners had produced the certificate of incorporation showing that the bank in which they had invested was registered under the Tamil Nadu Co-operative Societies Act, 1983, and then set out the definition in s.2(19). Reading the definition, it held that a co-operative society for this purpose is simply a society registered under a co-operative societies law, whatever business it carries on. It rejected the Revenue's reliance on Totgars as a decision under s.80P(2)(a)(i), and referred to a Division Bench decision of the same Court in Commissioner of Income Tax, Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd., decided on 10 August 2016 after considering the 2010 Supreme Court decision, in which the Division Bench had held the society entitled to the benefit under s.80P(2)(d). Since the impugned orders had been passed without considering all these aspects, they were liable to be set aside. In the words reproduced by the source cited on this page: "Thus, a Co-operative Society referred therein is only a co-operative society as defined under the Act, be it a Co-operative Society carrying on banking business or Co-operative Society carrying on the other businesses or a Co-operative bank." The decision followed or applied Commissioner of Income Tax, Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd., T.C.A. No. 5 of 2015, decided 10 August 2016 (Madras, Division Bench) — relied on; not separately retrieved on this pass; Totgars Co-operative Sale Society v. Income Tax Officer (SC) — distinguished as a decision under s.80P(2)(a)(i).
It was decided by the High Court on 2023-10-10 and is reported as W.P. Nos. 11172, 11174, 11177 and 11180 of 2023 and W.M.P. Nos. 11034, 11038, 11044 and 11048 of 2023 (High Court of Judicature at Madras). Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80P(2)(d), section 2(19), section 147, section 148, section 148A, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The writ petitions were allowed and all the impugned notices set aside, with no costs. Section 80P(2)(d) allows the whole of the interest or dividend derived by a co-operative society from its investment with any other co-operative society; 'co-operative society' is defined in s.2(19) by reference to registration under the Co-operative Societies Act 1912 or any other State law for the registration of co-operative societies, so a co-operative society referred to there is any society so registered, whether it carries on banking business or other businesses, and a co-operative bank so registered is within it. The Supreme Court's decision in Totgars was held inapplicable because eligibility here had to be decided under s.80P(2)(d) and not under s.80P(2)(a)(i). Because the impugned orders had been passed without considering these aspects, they could not stand. It arises in Co-operative Societies, Deductions & Disallowances and Reassessment & Reopening matters, on section 80P(2)(d), section 2(19), section 147, section 148, section 148A of the Income Tax Act 1961, and was decided by Krishnan Ramasamy J. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. In the s.148A(b) reply, set out s.2(19) in terms and make the point that the section defines a co-operative society by reference to registration, not by reference to what it does or whether the RBI has licensed it. If the s.148A(d) order deals with none of that, consider the writ route; but plead specifically that the order was passed without considering the material on record, which is the ground on which relief was given here. Where the year is assessment year 2018-19 or later, check s.80AC before anything else — a return filed after the s.139(1) due date forfeits s.80P entirely and no amount of argument on clause (d) will save it. Tell the client the construction is contested between High Courts and, in Karnataka, within one High Court.
High Courts differ on this point. This decision is on the same side of the s.80P(2)(d) question as the Karnataka High Court's judgment of 5 January 2017 (a separate entry in this batch) and the Gujarat High Court's decision in PCIT v. Rajkot Lodhika, already in the library. The Karnataka High Court took the opposite view on 16 June 2017, which the library also carries; special leave petitions against that judgment — SLP(C) Nos. 26314-26321 of 2017, SLP(C) No. 26817 of 2017 and SLP(C) Nos. 553-569 of 2018 — were part heard before M.R. Shah and A.S. Bopanna JJ on 27 October 2021 and listed for 10 November 2021 'as part heard', but that part-heard status has since lapsed and the file has passed through later Benches: orders of 3 July 2023 (A.S. Bopanna and M.M. Sundresh JJ), 20 November 2024, 27 November 2024, and 15 January 2025 before J.B. Pardiwala and R. Mahadevan JJ, 'Post these matters for final disposal on 19-2-2025'. No disposal could be traced after that date and no Supreme Court judgment on s.80P(2)(d) was found on a most-recent search restricted to the Supreme Court; treat the petitions as pending and possibly close to disposal, and check the current status before advising. Note also, on the January 2017 Karnataka judgment on whose side this decision sits, that the June 2017 coordinate Bench expressly declined to follow it — 'we are unable to follow the same in the face of the binding precedent laid by the Hon'ble Supreme Court' — while agreeing that a co-operative bank is a specie of the genus co-operative society; the contested question in Karnataka is therefore the reach of Totgars, not the meaning of 'co-operative society'. I did not check whether this Madras order has itself been appealed or followed, and no citator search was run. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The order has two paragraphs numbered 9. The descriptions of the petitioners in the cause title refer to 'WP.Nos.11173,11174 of 2022' and 'WP.Nos.1117, 11180 of 2022' although the writ petitions decided are W.P. Nos. 11172, 11174, 11177 and 11180 of 2023; the prayer clauses give the correct numbers. In the second paragraph numbered 9 the Court records that the co-operative bank in which the investments were made was registered under the Tamil Nadu Co-operative Societies Act, 1983 on 20 May 2003. Paragraph 12 relies on a Division Bench decision of the same Court, 'Commissioner of Income Tax Salem v. The Salem Agricultural Producers Co-operative Marketing Society Ltd' in Tax Case Appeal No. 5 of 2015 decided on 10 August 2016, which I did not retrieve or read; the question it quotes from that case is framed under s.80P(2)(a)(i) while the Court states the Division Bench held the society entitled to the benefit 'under 80P(2)(d)'. Paragraph 11 describes the issue in Totgars as whether interest received by a co-operative bank from its members by providing credit facilities is eligible for deduction, which does not correspond to the facts of Totgars as recorded elsewhere; the distinction the Court draws — that Totgars is a s.80P(2)(a)(i) case — is nonetheless the same distinction the Karnataka High Court drew on 5 January 2017. The order is signed by a single judge sitting on the writ side. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The writ petitions were allowed and all the impugned notices set aside, with no costs. Section 80P(2)(d) allows the whole of the interest or dividend derived by a co-operative society from its investment with any other co-operative society; 'co-operative society' is defined in s.2(19) by reference to registration under the Co-operative Societies Act 1912 or any other State law for the registration of co-operative societies, so a co-operative society referred to there is any society so registered, whether it carries on banking business or other businesses, and a co-operative bank so registered is within it. The Supreme Court's decision in Totgars was held inapplicable because eligibility here had to be decided under s.80P(2)(d) and not under s.80P(2)(a)(i). Because the impugned orders had been passed without considering these aspects, they could not stand.
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