Circular No. 6

6/2010 dated 20 09 2010

What this is

Circular No. 6 was issued by the Central Board of Direct Taxes on 20 September 2010. Its subject is 6/2010 dated 20 09 2010.

This is a clarification. The Board is stating how it reads a provision. That reading binds the department; it does not bind a court, and where the section says otherwise the section wins.

What it does

Shuts the door on section 80P for regional rural banks. Such banks are corporate entities and not co-operative societies, but section 22 of the Regional Rural Banks Act deems them to be co-operative societies for the purposes of the Income-tax Act, 1961, and on that footing Circular No. 319 dated 11 January 1982 had said that a regional rural bank is deemed a co-operative society for section 80P. The Finance Act, 2006 inserted sub-section (4) of section 80P with effect from 1 April 2007, providing that the section does not apply to a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The Board reiterates that a regional rural bank is therefore not eligible for deduction under section 80P from assessment year 2007-08 onwards, and withdraws Circular No. 319 for application with effect from that assessment year. Field officers are to take remedial action where required.

Why it was issued

It was brought to the Board's notice that despite the amendment some regional rural banks continued to claim the deduction relying on section 80P(1) read with Circular No. 319; the Board had already told the Reserve Bank of India by an office memorandum of 25 August 2006 that they would not be eligible from assessment year 2007-08.

Who it reaches

Regional rural banks claiming deduction under section 80P
Primary agricultural credit societies and primary co-operative agricultural and rural development banks, who remain outside sub-section (4)
Co-operative banks generally, who are hit by sub-section (4)

The provisions it speaks to

Left, the provision of the Income-tax Act, 1961 as the instrument itself names it. Right, the section of the Income-tax Act, 2025 that the department’s own concordance maps it to — which is where the same ground is now covered.

Under the 1961 Act	Now
s.22	s.20
s.80P	s.2, s.149, s.150

The instrument, as the Board published it

The words below are the department’s own, reproduced from its published text. Where the department’s copy carried a publisher’s notes after the instrument, those are not reproduced.

CIRCULAR
INCOME-TAX ACT
Section 80P of the Income-tax Act, 1961 - Deduction in respect of income of co-operative societies - Clarification regarding eligibility of deduction under section 80P to Regional Rural Banks
CIRCULAR NO. 6/2010 [F.NO. 173(3)/44/2009-IT (A-I)] DATED 20-9-2010
Section 80P of the Income-tax Act, 1961 provides for a deduction from the income of cooperative societies referred to in that section.
2. As Regional Rural Banks (RRB) are basically corporate entities (and not cooperative societies), they were considered to be not eligible for deduction under section 80P when the section was originally introduced. However, as section 22 of the Regional Rural Bank Act provides that a RRB shall be deemed to be cooperative society for the purposes of the Income-tax Act, 1961, in order to make such banks eligible for deduction under section 80P, CBDT issued a beneficial Circular No. 319 dated 11-1-1982, which stated that for the purpose of section 80P, a Regional Rural Bank shall be deemed to be a cooperative society.
3. Section 80P was amended by the Finance Act, 2006, with effect from 1-4-2007 introducing sub-section (4), which laid down specifically that the provisions of section 80P will not apply to any cooperative bank other than a Primary Agricultural Credit Society or a Primary Cooperative Agricultural and Rural Development Bank. Accordingly, deduction under section 80P was no more available to any Regional Rural Bank from assessment year 2007-08 onwards.
An OM dated 25-8-2006 addressed to RBI was issued by the Board clarifying that Regional Rural Banks would not be eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards.
4. It has been bought to the notice of the Board that despite the amended provisions, some Regional Rural Banks continue to claim deduction under section 80P on the ground that they are cooperative societies covered by section 80P(1) read with Boards Circular No. 319 dated 11-1-1982.
5. It is, therefore, reiterated that Regional Rural Banks are not eligible for deduction under section 80P of the Income-tax Act, 1961 from the assessment year 2007-08 onwards. Further more, the Circular No. 319 dated 11-1-1982 deeming any Regional Rural Bank to be cooperative society stands withdrawn for application with effect from assessment year 2007-08.
The field officers may take note of this position and take remedial action, if required.
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What to watch

The withdrawal of Circular No. 319 is expressly with effect from assessment year 2007-08, not from the date of this circular, so years up to assessment year 2006-07 stand on the earlier position.
The deeming in section 22 of the Regional Rural Banks Act survives — it is sub-section (4) of section 80P that defeats the claim, not the loss of co-operative society status.
The two carve-outs in sub-section (4) are narrow: a primary agricultural credit society and a primary co-operative agricultural and rural development bank.
The direction to take remedial action signals reopening and rectification in cases where the deduction was allowed.

Where you meet it

On a disallowance of a section 80P claim in the assessment of a regional rural bank, or on a rectification or reassessment withdrawing a deduction already allowed for assessment year 2007-08 or later.

What it names

It mentions. Circular No. 6/2010

On the same provision

Other instruments in this library that name the same provision of the 1961 Act. They are not necessarily still operative, and a later one may have replaced an earlier one without saying so.

Notification No. 11 — Amendment of the Income-tax Rules under section 22 of the Income-tax Act, 1961 18 January 2008
Notification No. 264 — Amendment of the Income-tax Rules under section 2 of the Income-tax Act, 1961 23 October 2007
Circular No. 319 — Section 80P l Income of Co-operative Societies 11 January 1982
Circular No. 9 — Income from House Property 25 March 1969
Circular No. 13/2023 — Condonation of delay under clause (b) of sub-section (2) of section 119 of the Income-tax Act, 1961 for returns of incom 26 July 2023
Circular No. 18/2015 — Interest from non slr securities of banks reg. 2 November 2015

← Circular No. [F. No. 225/72/2010/IT(A-II)] · Circular No. 402/92/2006-MC (40 OF 2010) →

A circular binds the department, not you and not a court. The Board issues a circular to its own officers. An assessee may hold the department to a circular that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves.

Source: the Income Tax Department’s own published text — its page for this instrument.