Lok Sabha Question No. 3126 (UNSTARRED), answered on 2023-08-08
Subject: Relief to Cooperative Societies
Ministry: COOPERATION
Asked by: Dileshwar Kamait

## GOVERNMENT OF INDIA MINISTRY OF COOPERATION

## LOK SABHA UNSTARRED QUESTION NO. 3126 TO BE ANSWERED ON 08/08/2023

## Relief to Cooperative Societies

## 3126. SHRI DILESHWAR KAMAIT:

Will the Minister of COOPERATION ( सहकाįरता मंũी) be pleased to state:

(a)  Whether the Government proposes to provide relief to the  Cooperative Societies from economic  point  of  view  by  reducing  the  tax  including  TDS  and  Income  Tax  on  various functions of the societies; and

(b)    If so, the details thereof and the categories of work for which tax has been reduced for cooperatives?

## ANSWER

## THE MINISTER OF COOPERATION सहकाįरता मंũी (SHRI AMIT SHAH)

(a) & (b): In order to realize the vision of 'Sahakar se Samriddhi', recently, the Government has  taken  following  steps  to  provide  relief  to  the  Cooperative  Societies  which  includes reduction  of  tax  on  various  activities  and  increasing  the  threshold  for  TDS  on  cash withdrawal by them:

## 1. Reduction in surcharge on cooperative societies

The  surcharge  on  co-operative  societies  has  been  reduced  from  12%  to  7%  on  income  of more  than  ₹1  crore  and  up  to  ₹10  crores.    This  would  help  in  enhancing  the  income  of cooperative societies and its members who are mostly from rural and farming communities.

## 2. Reduced Alternate Minimum Tax rate for cooperatives

Cooperative  societies  were  required  to  pay  Alternate  Minimum  Tax  at  the  rate  of  18.5%. However,  companies  paid  the  same  at  the  rate  of  15%.  To  provide  a  level  playing  field between co-operative societies and companies, the rate for the cooperative societies have also been reduced to 15% for cooperative societies.

## 3. Clarification in respect of section 269ST

Section 269ST restricts cash receipts in excess of ₹ 2 lakh from (a) any person in a day; or (b) from any transaction; or (c)  from multiple transactions in respect of single event or occasion. In  case  of  violation  of  this  provision,  penalty  for  the  amount  in  contravention  of  section

269ST is levied under Income Tax Act 1961. For payment of milk price to their members, Milk Cooperative Societies receive cash, in excess of ₹ 2 lakh across multiple days in a year, particularly  on  the  bank  holidays,  from  a  distributor,  with  whom  they  have  contract. Resultantly, huge penalties were levied on the Milk Societies by Income Tax Department by treating contract between Cooperative Societies with its distributor as one event / occasion. CBDT  vide  Circular  No  25/2022  dated  30.12.2022  issued  clarification  that  in  respect  of cooperative societies, a dealership / distributionship contract by itself may not constitute an event or occasion for purpose of clause (c) of the section 269 ST. Receipt related to such a dealership / distributionship contract by the cooperative society on any day in a previous year, which is with in prescribed limit may not be aggregated across multiple days for that previous year. This would enable Cooperative Societies to make payments to their members, who are mostly from  rural  and  farming  communities,  on  bank  holidays  without  fear  of  income  tax penalty.

## 4. Concessional rate of tax for new manufacturing cooperative societies

The new co-operatives that commence manufacturing activities till 31.03.2024 shall get the benefit of a lower tax rate of 15 %, as is presently available to new manufacturing companies.

## 5. Relief for cash loan/transactions by primary co-operatives

As  per  Section  269SS  of  the  Income  Tax  Act,  1961, any  deposit  or  loan  of  more  than  ₹ 20,000  in  cash  is  not  allowed.  Violation  can  invite  a  penalty  equal  to  the  loan  or  deposit amount.  Section 269SS of the Income Tax Act has been amended to provide that where a deposit  is  accepted  by  a  Primary  Agricultural  Credit  Society  (PACS)  or  a  Primary  Cooperative Agricultural and Rural Development Bank (PCARDB) from its member or a loan is taken from a PACS or a PCARDB by its member in cash, no penal consequence would arise, if the amount of such loan or deposit including their outstanding balance is less than ₹2 lakh. Earlier this limit was ₹ 20,000 per member.

## 6. Relief for repayment of loan in cash by primary co-operatives

As per Section 269T of the Income Tax Act, repayment of the loan or deposit of ₹ 20,000 or more  in  cash  is  not  allowed.  Violation  can  invite  a  penalty  equal  to  the  loan  or  deposit amount.  Section  269T  of  the  Income  Tax  Act  has  been  amended  to  provide  that  where  a deposit is repaid by a PACS or a PCARDB to its member or such loan is repaid to a PACS or a PCARDB by its member in cash, no penal consequence shall arise, if the amount of such loan or deposit including their outstanding balance is less than ₹2 lakh. Earlier this limit was ₹ 20,000 per member.

## 7. Increasing threshold limit for co-operatives to withdraw cash without TDS

A higher limit of ₹ 3 crore for TDS on cash withdrawal has been provided to co-operative societies.

## 8. Relief  to  sugar  cooperatives  by  providing  deduction  on  account  of  the  amount incurred for purchase of sugarcane .

Through  Finance Act  2015,  Section  36(1)(xvii)  was  inserted  in  Income  Tax  Act  1961  to provide  for  deduction  on  account  of  the  amount  of  expenditure  incurred  by  a  cooperative society  engaged  in  the  business  of  manufacture  of  sugar.  The  clause  took  effect  from 01.04.2016  i.e.,  assessment  year  2016-17.  However,  the  issue  of  treatment  of  additional payment for sugarcane price by Cooperative Sugar Mills (CSMs) as an income distribution to farmer  members  and  resultant  tax  liabilities  remained  uncovered  which  was  clarified  by Central  Board  of  Direct  Taxes  vide  Circular  No  18/2021  dated  25.10.2021.  Accordingly, resultant  tax  liabilities  on  CSMs  on  additional  payment  for  sugarcane  price  by  them  were mitigated w.e.f. 1.4.2016.

## 9. Relief to sugar co-operatives from past income tax demand

An  opportunity  has  been  provided  to  sugar  co-operatives  to  claim  payments  made  to sugarcane farmers for the period prior to assessment year 2016-17  as expenditure. Accordingly,  section 155 of the IT Act  has also  been amended to insert  a  new  sub-section (19) vide Finance Act, 2023, w.e.f. 1st April 2023. In order to standardize the manner of filing application  to  the  Jurisdictional Assessing  Officer  under  sub-section  (19)  of  section  155 of the Act and its disposal by the Jurisdictional Assessing Officer under the said section, CBDT vide Circular No. 14 of 2023 dated 27.07.2023 has issued Standard Operating Procedure for making application by the concerned Cooperative Sugar Mills. This has resolved the income tax  issues  in  this  matter  pending  for  decades.  This  is  expected  to  provide  relief  of  almost ₹10,000 crore.

## 10. Condonation  of  delay  under  clause  (b)  of  sub-section  (2)  of  section  119  of  the Income Tax Act, 1961 (IT Act) for returns of Income claiming deductions u/s 80P of the Act for various assessment years from AY 2018-19 to AY 2022-23

CBDT vide circular  no.  13/2021  dated  26  July  2023  has  authorized  Chief  Commissioners  of Income-tax  (CCsIT)  /  Directors  General  of  Income-tax  (DGsIT)  to  deal  with  applications  of condonation  of  delay  from    cooperative  societies,  who  were  unable  to  avail  the  benefit  of deduction available under section 80P of the IT Act on account of delay in furnishing the return of  income  within  the  due  date  under  sub-section  (1)  of  section  139  of  the  Act  for  various assessment  years  from  AY  2018-19  to  AY  2022-23  and  the  delay  was  caused  due  to circumstances beyond their control or due to delay in getting the accounts audited by statutory auditors appointed under the respective State Law.

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