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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the assessee co-operative society was a primary co-operative bank or co-operative bank so as to be hit by section 80P(4) of the Income-tax Act, 1961 and thereby denied deduction under section 80P(2)(a)(i).
Analysis: Section 80P(2)(a)(i) allows deduction to a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, whereas section 80P(4) excludes only a co-operative bank other than the specified agricultural credit institutions. A primary co-operative bank under section 5(ccv) of the Banking Regulation Act, 1949 requires satisfaction of three conditions: banking as the primary object or principal business, paid-up share capital and reserves of at least one lakh rupees, and bye-laws not permitting admission of any other co-operative society as a member. On the facts, the assessee accepted deposits from members and non-members and used them for lending, satisfying the banking activity requirement, and its capital and reserves exceeded the prescribed minimum. However, its bye-laws permitted admission of other co-operative societies as members, so all statutory conditions for a primary co-operative bank were not met. The society therefore did not fall within the definition of a co-operative bank for section 80P(4) purposes.
Conclusion: The assessee was not a primary co-operative bank, section 80P(4) did not apply, and deduction under section 80P(2)(a)(i) was allowable.
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