Income-Tax On Co-Operative Societies

1.         Definition of Co-operative society [Section 2(19)]—

Co-operative society’ means a co-operative society registered under the Co-operative Societies Act, 1912, or under any other law for the time being in force in any State for the registration of co-operative societies, regional rural bank is deemed to be a co-operative society — Vide Circular No. 319, dated 11-01-1982.

2.         Deduction in respect of income of co-operative societies [Section 80P]

(1)        Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred below, there shall be deducted.

(2)        The sums referred to above 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 grown by its members, or

(iv)       the purchase of the agricultural implements, seeds, live-stock 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 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.

However, In the case of a co-operative society falling under sub-clause (vi) or (vii), the rules and bye- laws of the society restrict the voting rights to the following classes of its members, namely:— (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government.

(b)       In the case of a co-operative society, being a primary society engaged in supplying milk, oil-seeds, fruits or vegetables raised or grown by its members to—

(i)         a federal co-operative society, being a society engaged, in supplying milk, oil-seeds, fruits or vegetables, as the case may be; or

(ii)        the Government or a local authority; or

(iii)       the Government company as defined in section 617 of me Companies Act. 1956 or a corporation established by or under a Central, State or Provincial Act, the whole of the amount of profits and gains of such business;

(c)        In the case of a co-operative society engaged in activities other than those specified in above or either independently of, or in addition to, all or any of the activities so specified, so much of its profits and gains attributable to such activities as does not exceed,

(i)         where such co-operative society is a consumers’ co-operative society Rs. 1,00,000.

(ii)        In any other case Rs. 50,000.

(d)       In respect of any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income;

(e)        In respect of any income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities, the whole of such income;

(f)        In the case of a co-operative society, not being a housing society or an urban consumers’ society or a society carrying on transport business or a society engaged in the performance of any manufacturing operations with the aid of power, where the gross total income does not exceed Rs. 20,000, the amount of any income by way of interest on securities or any income from house property.

(3)        In a case where the assessee is entitled also to the deduction under sections 8OHH or 8OHHA or 8OHHB or 8OHHC or 8OHHD or 80-I or 80-IA or 80J, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or (b) or (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 sections 8OHH, 8OHHA, 8OHHB, 8OHHC,8OHHD, 80-I, 80-IA or 80J and 8OJJ.

(4)        It 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.

  • The issue as to whether interest income from such securities could be treated as from banking business and not an income from other sources ineligible for relief u/s 80P, has been resolved in CIT Vs. Karnataka State Co-operative Apex Bank [2001] 251 ITR 194 (SC), so that the Revenue was not justified in following an earlier decision of the Supreme Court taking a contrary view. It was so held in CIT Vs. Rajasthan State Co-operative Bank [2005] 272 ITR 600 (Raj.). Hence the view of Supreme Court in Madhya Pradesh Co-operative Bank Ltd. Vs. AddI. CIT [1996] 218 ITR 438 is no more a good law.
  • CIT Vs. Kangra Co-operative Banks Ltd. (2008) 12 DTR 227 (HP) — Interest earned by the assessee a co-operative bank on fixed deposit with another co-operative bank in compliance with the State Co-operative Societies Act was held to be income derived from banking business eligible for deduction u/s 80P of the Act.

RATES OF INCOME-TAX FOR CO-OPERATIVE SOCIETIES
A.Y. 2014-2015 & A.Y. 2015-2016

Total Income

Rates of income-tax

1.

Where the total income does not exceed Rs. 10,000.

10% of the total income;

2.

Where the total income exeeds Rs. 10,000 but does not exceed Rs. 20,000.

Rs. 1,000 pIus 20%. of the amount IYy which the total income exceeds Rs. 10,000;

3.

Where the total income exceeds Rs. 20,000. 

Rs. 3,000 pIus 30%. of the amount by which the total income exceeds Rs. 20,000.

Notes:
(1)       
No surcharge shall be levied on Co-operative societies from A.Y. 2006-2007.
(2)        Education Cess @2% of Income-tax and surcharge thereon shall be paid.
(3)        From A.Y. 2008-2009, Additional Secondary & Higher Education Cess @1% of Income livable  on all assessee.
(4)        For A.Y. 2014-2015 & 2015-2016 , 10% surcharge on Income-Tax , if total income exceed 
`. 2 crore.
 
 

   
   
   
   
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