Section 80P

Section 80P — the law in short

What the courts have decided on section 80P, in one screen. Read this first; open an entry when you need the facts, the reasoning and the source.

• KSCARDB v Assessing Officer Supreme CourtHelps taxpayer
  We are a state-level co-operative agricultural and rural development bank. Does 80P(4) block our deduction?
  No. The appellant is an apex co-operative society providing credit to its member societies, not a 'co-operative bank' within s.80P(4) read with the Banking Regulation Act, 1949, so the deduction under s.80P(2)(a)(i) is available.
• Mavilayi Service Co-operative Bank Ltd v CIT Supreme CourtHelps taxpayer
  My society lends to non-members too. Does that wipe out its 80P(2)(a)(i) deduction?
  No. The deduction stands: the society need not lend only for agricultural purposes, and lending to non-members does not disentitle it — only the profits from non-member loans fall outside the deduction. Section 80P(4) shuts out only co-operative banks licensed to carry on banking business.
• Citizen Co-operative Society Ltd v ACIT Supreme CourtHelps departmentPartly overruled — read this first
  The AO cites Citizen Co-operative Society to deny my 80P claim. How far does it go?
  Only as far as mutuality. The society there lost because its 'nominal members' were not members in law, the contributors to the surplus and the participants in it were not the same body, and it was in substance running a finance business outside the statute under which it was registered.
• Totgars Co-operative Sale Society Ltd v ITO Supreme CourtHelps department
  My society invested surplus funds in short-term bank deposits. Is that interest covered by 80P?
  No. Interest on surplus funds not required for immediate business use is not attributable to providing credit to members or to marketing their produce. It is income from other sources under s.56 and outside s.80P(2)(a)(i).
• Bharat Electronics Employees Co-op Credit Society v CCIT High CourtHelps taxpayer
  Our co-operative credit society filed its return late and lost the section 80P deduction under section 80AC. The Chief Commissioner has rejected our section 119(2)(b) condonation application for want of sufficient cause. Is that rejection sustainable?
  No, not on these facts. The Andhra Pradesh High Court set aside the Chief Commissioner's order refusing to condone the delay and directed that the return be treated as filed within time. The Court held that co-operative societies became liable to file returns only on the Finance Act, 2018 amendment, that a society run with minimal staff and unaware of the provisions is itself in genuine difficulty, and that the authorities must take a liberal approach towards co-operative societies in the teeth of CBDT Circular No. 13/2023. It did not decide the section 80P claim; that was left to be dealt with in assessment.
• Bannanje Grahakara Vividhoddesha Sahakara Sangha Ltd v CIT (Appeals), NFAC High CourtCuts both ways
  The Tribunal remanded the nominal member issue to the Assessing Officer but recorded findings on the merits while doing so, leaving the officer nothing to decide. Is there anything I can do about that in the High Court?
  Yes. The Karnataka High Court declined to interfere with the order of remand itself, but accepted that the Tribunal's observations on the merits might prejudice the assessee and clarified that the remand proceedings are to be considered independently, uninfluenced by any observations or findings recorded by the Tribunal on merits, strictly in accordance with Mavilayi Service Co-operative Bank and having regard to the relevant provisions of the Karnataka Co-operative Societies Act.
• PCIT v Rajkot Lodhika Sahakari Kharid Vechan Sangh High CourtHelps taxpayerNo later treatment found
  The PCIT revised my assessment saying a co-operative bank is not a co-operative society. Is that right?
  Not on the Gujarat view. A co-operative bank is itself a co-operative society registered under the State Co-operative Societies Act, so it falls within 'any other co-operative society' in s.80P(2)(d); the interest was deductible and the s.263 revision was set aside.
• Thiruvananthapuram District Electricity Board Employees Co-operative Society Ltd v ITO High CourtCuts both waysHigh Courts differ
  Our employees' credit society earns interest from the District Co-operative Bank and also from the treasury. The Commissioner (Appeals) refused s.80P(2)(d) on both. Where does the Kerala High Court stand?
  The Kerala High Court quashed the appellate orders so far as they refused the deduction, holding that the entitlement to deduct interest received by a co-operative society from its investments with other co-operative societies is settled in the assessee's favour by its own Division Bench decision in Pr. CIT v Peroorkada Service Co-operative Bank Ltd. (2022) 442 ITR 141 (Ker). Interest from a District Co-operative Bank was therefore deductible; interest from the treasury was not, and the year in which treasury interest was received was sent back for re-examination.
• Kanyakaparameshwari Co-operative Society Ltd v CCIT High CourtHelps taxpayerNo later treatment found
  My co-operative society filed its return late and lost section 80P because of section 80AC. If the delay is condoned under section 119(2)(b), does the deduction come back?
  On this Karnataka view, yes. The Court held that section 80AC does not say in express terms that the deduction becomes inadmissible if the delay in filing the return is condoned, so an order under section 119(2)(b) condoning the delay clears the way for the claim. It adopted its earlier decision in Sullia Taluk Womens Multi Purpose Co-operative Society and read the Central Board's circular of 26 July 2023, which directs the authorities to admit and decide condonation applications from audited co-operative societies for assessment years 2018-19 to 2022-23 on the merits. The rejection of the society's application was quashed and the delay condoned, and the Court went on to quash the completed assessment as well and remit the claim for fresh consideration.
• K.2058 Saravanampatti Primary Agricultural Co-operative Credit Society Ltd v ITO High CourtHelps taxpayer
  The Assessing Officer taxed our interest on deposits under s.56 by simply citing Totgars, without answering our case that the deposits are a statutory reserve we are obliged to maintain and that the interest we paid on borrowings should be netted against it. Is that order sustainable?
  No. The Madras High Court set aside the assessments as non-speaking and passed without application of mind, holding it a fatal flaw that the Assessing Officer had brushed aside, in a single line, the society's arguments that the deposits were a statutory reserve and not surplus funds, that Nawanshahar Central Cooperative Bank applied, and that at worst the interest received should be netted against the interest paid. The Court expressed no opinion on the merits and remanded for a speaking order.
• M/s Swabhimani Souharda Credit Co-operative Ltd v Government of India High CourtHelps taxpayer
  We are registered under the Karnataka Souharda Sahakari Act 1997, not the Karnataka Co-operative Societies Act 1959. The Assessing Officer says we are not a 'co-operative society' under s.2(19) and so cannot claim s.80P at all. Is that right?
  No. The Karnataka High Court declared that entities registered under the Karnataka Souharda Sahakari Act, 1997 fit the definition of 'co-operative society' in s.2(19) of the Income-tax Act, 1961 and are therefore entitled to stake their claim to the benefit of s.80P. The definition covers a society registered under the Co-operative Societies Act 1912 or under any other law for the time being in force in a State for the registration of co-operative societies, and the 1997 Act is such a law.
• Lalitamba Pattina Souharda Sahakari Niyamita v ITO High CourtHelps taxpayer
  The Tribunal refused my society's s.80P(2)(a)(i) claim on bank fixed deposit interest saying it had already been given s.80P(2)(d). Can the two clauses be treated as interchangeable, and if the interest really is income from other sources, what happens to my cost of funds?
  No, they cannot. The Karnataka High Court held that s.80P(2)(a)(i) and s.80P(2)(d) are entirely different and distinct provisions, that a deduction given under (d) does not disentitle a society from claiming under (a)(i), and that the authorities cannot reject an (a)(i) claim by mixing up the two. It further held that even if the interest is assessable under s.56, the Tribunal, as the last fact finding authority, was obliged to examine the proportionate cost of funds and administrative expenses deductible under s.57, and it remanded the matter to the Assessing Officer.
• PCIT v Totagars Co-operative Sale Society High CourtHelps department
  My society earns interest on deposits with a co-operative bank. Is it deductible under 80P(2)(d)?
  On the Karnataka view, no. Interest on idle or surplus funds keeps its character as income from other sources whether the depositee is a scheduled bank or a co-operative bank, and clause (d) speaks only of 'any other co-operative society' — the words 'co-operative banks' are absent from it.
• Vavveru Co-operative Rural Bank Ltd v CCIT High CourtHelps taxpayer
  My society deposited part of the income from its members' business in a nationalised bank. The Assessing Officer says the interest is income from other sources and not deductible under s.80P(2)(a), relying on Totgars. Is there an answer?
  There is one, and it turns on two words. The High Court held that s.80P(2)(a) allows the whole of the profits and gains of business 'attributable to' the listed activities, not merely those 'derived from' them, that 'attributable to' is wider, and that where the original source of the deposits was the income from a listed activity the character of that income is not lost when it is temporarily deposited in a bank. Totgars was distinguished on its facts.
• PCIT v Totagars Co-operative Sale Society (5 January 2017) High CourtHelps taxpayerHigh Courts differ
  My society earns interest on deposits placed with a co-operative bank. The Assessing Officer says s.80P(2)(d) covers only investments with a co-operative society and a co-operative bank is not one. Is there authority the other way?
  Yes. The Karnataka High Court, Dharwad Bench, held that 'co-operative society' is a genus and 'co-operative bank' a species of it, so a co-operative bank is necessarily covered by the words 'co-operative society' and interest earned from it qualifies under s.80P(2)(d). It also held that the Supreme Court's decision in Totgars, being on s.80P(2)(a)(i), is inapplicable to a claim under s.80P(2)(d). But the same High Court, at the same Bench, took the opposite view five months later on the same assessee.
• Punjab State Cooperative Federation of House Building Societies Ltd v CIT-II High CourtHelps department
  We lost on s.80P before the Tribunal. Can we raise the s.57 cost of funds point for the first time in the High Court, and does interest we charge our own employees qualify under s.80P(2)(a)(i)?
  No on both counts, on this decision. The Punjab and Haryana High Court refused to entertain questions on s.57(iii) and on deduction of costs against interest assessed under s.56 because no such plea had been argued before the Tribunal, holding that they did not arise from the Tribunal's order and raised no substantial question of law. It also upheld the Tribunal's view that s.80P(2)(a)(i) is available only in respect of the society's core activities, so that interest from other banks and interest received from employees who are not members does not qualify.
• Tumkur Merchants Souharda Credit Co-op Ltd v ITO High CourtHelps taxpayer
  The AO cites Totgars against my credit society's deposit interest. Can I still claim 80P?
  Yes, if the deposits arose in the course of the credit business. 'Attributable to' is wider than 'derived from', so interest on short-term deposits of funds not immediately needed for lending remains within s.80P(2)(a)(i).
• Kottayam Co-operative Land Mortgage Bank v CIT High CourtHelps department
  Our co-operative society has receipts that fall outside the activities named in section 80P(2)(a). Can we fall back on the residual deduction in clause (c), and what do we have to show?
  It depends, and the test is narrower than the words look. The Kerala High Court held that clause (c) does reach receipts from sources other than the actual conduct of the business, because 'attributable to' is much wider than 'derived from'. But the receipt must be attributable to an activity that the society itself carries on. 'Activity' is wider than 'business' and connotes a specified form of supervised action or field of action. On that test the society failed: rent from letting surplus space in the building it owned and used for its own banking work was held not to arise from such an activity, and the deduction was refused.
• Kassia Credit Co-operative Society v DCIT ITATHelps departmentJudgment not reachable
  My society filed its return only in response to a 148 notice. Can it still claim 80P?
  No. Section 80AC(ii) makes filing by the s.139(1) due date a condition precedent for deductions under Part C of Chapter VI-A, which includes s.80P, and a return filed pursuant to a s.148 notice does not cure the default.
• Lodha Maharana Pratap Nagar Co-operative Housing Society Limited v ITO ITATCuts both waysNo later treatment found
  The CPC taxed my society's receipts from members. Can I get that corrected under section 154, or have I lost the claim by not making it in the return?
  Section 154 will not carry it. The Mumbai Tribunal agreed with the Assessing Officer and the CIT(A) that mutuality and eligibility under s.80P require examination of foundational facts and cannot be a mistake apparent from the record. But the claim was not lost: Goetze (India) restricts only the Assessing Officer, not the appellate authorities, so the Tribunal restored the matter to the Assessing Officer to examine the claim on merits.
• Bicholim Electricity Employees Cooperative Credit Society Ltd v ITO ITATHelps taxpayerNo later treatment found
  My co-operative credit society filed Form 10-IF opting into s.115BAD and then claimed deduction under s.80P in the same return. CPC has disallowed the whole s.80P deduction under s.143(1). Is there anything to be said?
  There is an argument, and the Tribunal let it be run — but it did not decide it. On these facts the Tribunal restored the matter for fresh adjudication on the merits, recording the case that the society did not satisfy the conditions in s.115BAD(2) and had filed Form 10-IF erroneously, and that the adjustment made under s.143(1) was not within the permissible adjustments. The underlying rule is unforgiving and should be understood before any co-operative society files Form 10-IF: s.115BAD(2)(i) requires total income to be computed 'without any deduction ... under any of the provisions of Chapter VI-A other than the provisions of section 80JJAA', and s.80P is in Chapter VI-A.
• ITO v Sahakara Nagar Credit Co-operative Society ITATCuts both waysNo later treatment found
  My society has nominal and associate members. Does that alone destroy the 80P deduction?
  No. Where the State Co-operative Societies Act permits those classes of membership, their presence is not by itself a ground to disallow s.80P. The outcome was mixed, though: rental, commission and miscellaneous receipts were held ineligible.
• Shree Dhamel Seva Sahkari v ADIT (CPC) ITATCuts both waysNo later treatment found
  CPC denied my society's 80P in a 143(1) intimation because the return was late. Can it?
  Not outright. The Tribunal accepted the submission that a debatable issue cannot be adjusted under s.143(1)(a), and said that a co-operative society whose s.80P claim is valid and substantiated should not be denied it merely because the return was late - but it did not quash the intimations and did not decide the s.80AC(ii) question. It remitted all three appeals to the Assessing Officer to examine the claims, allowing them for statistical purposes, and expressly directed that the decision is confined to its own facts and is not to be treated as a precedent.
• Technopolis Premises Co-operative Society Ltd v Pr. CIT — s.80P is expressly carved out of the AMT add-back ITATHelps taxpayerNo later treatment found
  The Commissioner has revised my co-operative society's assessment under s.263 because AMT on adjusted total income came out higher than the normal tax. The department's working grossed up my total income by the s.80P deduction. Is that right?
  It is not. Clause (i) of s.115JC(2) requires total income to be increased by deductions claimed under any section "other than section 80P" included in Chapter VI-A under heading C. The Assessing Officer's internal working had added back the s.80P deduction of Rs.56,16,242, producing an adjusted total income of Rs.1,13,55,916 instead of the correct Rs.57,39,674; on the correct figure the AMT was lower than the normal tax, so there was no prejudice to the Revenue and no ground for revision.
• Statutory position — s.80P(4): which bodies are shut out, and what the Banking Regulation Act 1949 actually defines CBDT Circulars & InstructionsCuts both ways
  The Assessing Officer says my society is a co-operative bank and so s.80P(4) denies the whole deduction. What does he have to establish before he can say that?
  Section 80P(4) provides that the provisions of s.80P shall not 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, and its Explanation borrows the meanings of 'co-operative bank' and 'primary agricultural credit society' from Part V of the Banking Regulation Act, 1949. Under Part V a co-operative bank is only one of three things — a State co-operative bank, a central co-operative bank or a primary co-operative bank — so unless the society answers one of those three descriptions it is not hit by sub-section (4), whatever its name or its bye-laws call it.
• Statutory position — s.44DB: when a co-operative bank amalgamates, demerges or converts, the year's deduction under ss.32, 35D, 35DD and 35DDA is split by days, not lost CBDT Circulars & InstructionsCuts both waysNo later treatment found
  Our co-operative bank amalgamated in October. The successor is claiming the whole year's depreciation and amortisation. Is that right, and what happens to our part of it?
  It is not right, and the section says so arithmetically. Section 44DB provides that the deduction under section 32, section 35D, section 35DD or section 35DDA shall, in a case where business reorganisation of a co-operative bank has taken place during the financial year, be allowed in accordance with that section. The predecessor co-operative bank gets A x B / C, where A is the amount of the deduction that would have been allowable had the business reorganisation not taken place, B is the number of days from the beginning of the financial year up to the day before the reorganisation, and C is the total number of days in that financial year. The successor co-operative bank, or the converted banking company, gets the same formula with B taken as the number of days from the date of the reorganisation to the end of the financial year. The section then provides for the continued application of sections 35D, 35DD and 35DDA to the successor for the remaining years. The Explanation defines 'business reorganisation' as the reorganisation of business involving the amalgamation or demerger of a co-operative bank or the conversion of a primary co-operative bank, and defines the amalgamating, amalgamated, predecessor and successor banks, 'co-operative bank' by reference to the Banking Regulation Act, 1949, 'demerger', and 'conversion' by reference to a Reserve Bank of India circular of 27 September 2018.

Listed strongest first: Supreme Court, then High Court, then Tribunal, then CBDT. Nothing here has yet been read in full by a chartered accountant — open an entry to see where it came from.