In Brief
Cooperative banks registered as primary agricultural credit societies under the Kerala Cooperative Societies Act challenged tax demands after the Finance Act 2006 amended income-tax deduction rules. The Supreme Court held that once a society is registered as a primary agricultural credit society, tax authorities cannot disregard that registration to deny deductions under section 80P(2)(a)(i) of the Income-Tax Act. The new section 80P(4) excludes only licensed cooperative banks; primary agricultural credit societies remain eligible. However, profits from loans to non-members are not deductible, and if agricultural credits become negligible, deductions may be denied. The Court clarified legal interpretation principles regarding statutory provisos and binding precedent.
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