Section 80P of ITA, 1961 : Section 80P: Deduction In Respect Of Income Of Co-Operative Societies

Explanation using Example

Let's consider a hypothetical scenario where there is a cooperative society named 'GreenFarm Co-operative Society' which is engaged in the marketing of agricultural produce grown by its members. For the financial year, GreenFarm reports a gross total income that includes profits and gains from their marketing business. According to Section 80P of the Income-tax Act, 1961, GreenFarm Co-operative Society is eligible for certain deductions from its taxable income.

Under subsection (2)(a)(iii) of Section 80P, since GreenFarm is engaged in the marketing of agricultural produce grown by its members, it can claim a deduction of the entire amount of profits and gains from that activity when computing its total income for tax purposes. This means that the profits earned from marketing the agricultural produce will not be taxed, providing a financial benefit to the society.

Additionally, if GreenFarm had invested some of its funds in another cooperative society and earned interest or dividends from those investments, under subsection (2)(d), the society could also deduct the whole amount of that income from its taxable income.

Furthermore, if the society had let out godowns or warehouses for the storage, processing, or facilitating the marketing of commodities, under subsection (2)(e), the income derived from these lettings would also be fully deductible.

However, GreenFarm must ensure that it complies with the conditions stipulated in Section 80P, such as not being a cooperative bank other than a primary agricultural credit society or a primary cooperative agricultural and rural development bank, as mentioned in subsection (4).

In summary, Section 80P provides significant tax benefits to cooperative societies like GreenFarm, enabling them to reinvest more of their profits into supporting their members and the society's activities.