N Satya Narayana, Chief Executive of the apex co-op body NCUI has welcomed the Supreme Court verdict on January 12 upholding income tax exemption under Section 80P for primary agricultural credit societies.
Tweeting on the issue, Satya Narayan wrote “NCUI welcomes SC verdict on Jan 12 upholding IT exemption under Section 80 P for primary agricultural credit societies, except coop banks under RBI operating license–N Satya Narayana, CE, NCUI”
The verdict, exempting credit societies and other primary societies from paying income tax, was delivered by a three-judge bench comprising justices R.F. Nariman, Naveen Sinha and K.M. Joseph. The SC ruling came on the Kerala High Court’s full bench verdict of March 2019.
The verdict has saved more than 90% of cooperatives from closure. These primary institutions will benefit from the verdict,” said several co-operators associated with credit co-ops.
According to the daily The Hindu “the verdict would save co-operatives from incurring huge liabilities of over ?5,500 crore. He added that the ruling had given a new impetus to the economy of Kerala in the context of COVID-19. Disputes since 2007 have now been laid to rest”.
According to the verdict, all cooperatives registered under the Kerala Cooperative Societies Act could be considered as cooperative societies, and that only those operating with Reserve Bank of India licence could be considered as cooperative banks, says Kince Varghese, secretary, Mavilayi Service Cooperative Bank, Kannur.
The SC verdict is expected to end the oft-repeated high-handedness of the Income Tax department witnessed across states. Credit cooperatives of different states have been protesting against the IT sleuths harassing them. Karnataka’s co-ops had protested against Income Tax offices across districts in the state earlier.
It is to be noted that according to sub-section 4 of 80 P that the IT act does not apply to Credit Cooperatives but despite this income tax officials kept harassing them. They received notices every now and then.
A couple of years ago, cooperators connected with credit co-operative societies from across the country had assembled at NCUI to find a solution to what many of them call tax terrorism.
Earlier, hearing a plea the Supreme Court had observed that sub section 4 of 80 P clearly says that the IT Act would not apply to credit societies as they are not banks. But things change when the credit co-ops do business transactions with nominal members. The act gives exemption till the business is done with members as the principle of mutuality operates in such transactions.