Section 80P deduction for a co-operative credit society upheld; section 80P(4) did not bar the claim.

A co-operative credit society was held entitled to deduction under section 80P(2)(a)(i) because section 80P(4) was treated as excluding only a co-operative bank carrying on banking business exclusively. The society's bye-laws allowed membership by persons competent to contract, which was read broadly enough to include a co-operative society, and it was not shown to hold a banking licence or to fall within the statutory meaning of a co-operative bank. On that basis, the deduction remained available for credit facilities provided to members, and the section 80P(4) bar did not apply.

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Issues: Whether the assessee, a co-operative credit society, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 and whether section 80P(4) barred the claim on the footing that the assessee was a co-operative bank.

Analysis: The assessee satisfied the lending and banking-related features noticed by the Revenue, but its bye-laws did not prohibit a co-operative society from becoming a member. The membership clause extended to every person competent to contract under section 11 of the Indian Contract Act, 1872, and that expression was treated as wide enough to include a co-operative society. The jurisdictional High Court ruling relied upon held that section 80P(4) excludes only a co-operative bank carrying on banking business exclusively and does not withdraw the deduction from a co-operative society providing credit facilities to its members. The decision also noted that the assessee did not possess a banking licence and was not shown to be a co-operative bank within the statutory sense.

Conclusion: The bar under section 80P(4) did not apply, and the assessee was entitled to deduction under section 80P(2)(a)(i).

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