Law: Income Tax Act, 1961

Section: 80P

Income-tax----Cooperative society---Meaning of "member"---Special deduction--¬Income from providing credit facility to members---Meaning of "member"--¬Word "member" is used in its normal sense and would not include member of member society---Special deduction not available to federation of cooperative societies which extends credit facility to a member society--¬Indian Income Tax Act, 1961, S-80P ---Cooperative Societies Act, S.2. Section 80P(2)(a)(i) of the Income Tax Act, 1961, gives a special deduction to a cooperative society in respect of income from carrying on the business of banking or providing credit facilities to its members. The expression "members" is not defined in the Act. Since a cooperative society has to be established under the provisions of the law made by the State Legislature in that regard, the expression "members" in section 80P(2)(a)(i) must be construed in the context of the provisions of the law enacted by the State Legislature under which the cooperative society claiming exemption has been formed. It is, therefore, necessary to construe the expression "members" in section 80P(2)(a)(i) of the Act in the light of the definition of that expression as contained in section 2(n) of the Cooperative Societies Act. In section 80P(2)(a)(i) when Parliament has used the expression "members", it has used it in the normal sense of a member of a cooperative society. The intention was to extend the exemption to cooperative societies directly extending credit facilities to its members. There is nothing in the said provisions to show that the intention was to grant exemption to cooperative societies which were extending credit facilities to persons, who, though not the members of the said society, were members of another cooperative society which -was a member of the cooperative society seeking exemption. The meaning of the expression "members cannot, therefore, be extended to include the members of a primary cooperative society which .is a member of the federated cooperative society seeking exemption. The principle of lifting the corporate veil cannot have any application in the context of the provisions contained to section 80P(2)(a)(i). In clause…

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