24. Co-operative Societies

Normal

10% on income up to Rs. 10,000; 20% from Rs. 10,000 to Rs. 20,000; 30% above

Surcharge 7% above Rs. 1 crore, 12% above Rs. 10 crore; AMT at 15% if deductions are claimed

Concessional (old 115BAD)

22% plus 10% surcharge and cess

No specified deductions and exemptions; no AMT

New manufacturing co-operatives (old 115BAE)

15% plus 10% surcharge and cess

Set up and began manufacturing within the prescribed dates; no specified deductions

Banking or providing credit facilities to members (credit societies; co-operative banks other than primary agricultural credit societies and primary co-operative agricultural and rural development banks are excluded)

100% of profits from that activity

Cottage industry, marketing of members' agricultural produce, purchase of agricultural implements, seeds and livestock for members, processing of members' produce without power

100%

Collective disposal of labour of members, fishing and allied activities

100%

Supplying milk, oilseeds, fruits or vegetables raised or grown by members to specified bodies

100%

Interest and dividends from investments in other co-operative societies

100%

Income from letting of godowns and warehouses for storage and marketing of commodities

100%

Other societies

Up to Rs. 50,000 (Rs. 1 lakh for consumer co-operative societies)

Judicial view: Co-operative banks and credit societies

The Mavilayi Service Co-operative Bank Ltd. v. CIT (Supreme Court, 2021): the deduction for co-operative societies is a benevolent provision to be read liberally. The exclusion for co-operative banks applies only to societies that carry on banking business like commercial banks (lending to the public under a banking licence), not to credit societies that lend to their members. Eligibility is to be examined on the facts of each society.

Illustration 96: Credit society

A credit co-operative society has income of Rs. 80 lakh from lending to its members and Rs. 10 lakh from interest on deposits with a scheduled bank. The Rs. 80 lakh is fully deductible under section 149. Interest from a scheduled bank (not a co-operative) on surplus funds is not covered; the Supreme Court in Totgars Co-operative Sale Society Ltd. v. ITO (2010) held such interest taxable as income from other sources. Taxable income = Rs. 10 lakh, taxed at the co-operative rates.

Chapter summary

• Separate rate structure with concessional options.

• Section 149 deductions for credit, marketing, processing and other activities.

• Interest from commercial banks on surplus funds is generally taxable.