Co-operative society deduction under section 80P survives where statutory conditions for a co-operative bank are not satisfied.

A co-operative society is not excluded from deduction under section 80P(2)(a)(i) merely because it carries on banking-like or credit activities with its members. The exclusion in section 80P(4) applies only where the entity is a co-operative bank that satisfies the statutory attributes of a primary co-operative bank under the Banking Regulation Act, including the primary object of banking business, prescribed share capital and reserves, and membership restrictions in the bye-laws. On the stated facts, the society did not meet all those conditions and therefore remained outside the section 80P(4) bar, with deduction under section 80P(2)(a)(i) continuing to be available.

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Issues: Whether the assessee co-operative society was a 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. Section 80P(4) withdraws that benefit only from a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. For a society to be treated as a primary co-operative bank under section 5(ccv) of the Banking Regulation Act, 1949, all the statutory conditions must coexist, including the primary object of banking business, prescribed share capital and reserves, and bye-laws not permitting admission of any other co-operative society as a member. On the facts, the assessee did not satisfy all those conditions. It was a co-operative society, not a co-operative bank, and therefore the exclusion in section 80P(4) did not apply.

Conclusion: The assessee remained entitled to deduction under section 80P(2)(a)(i), and the disallowance was unsustainable.

Ratio Decidendi: Section 80P(4) applies only to a co-operative bank that satisfies the statutory attributes of a primary co-operative bank, and a co-operative society that does not satisfy those attributes continues to qualify for deduction under section 80P(2)(a)(i) for eligible banking or credit activities carried on with its members.

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