Section 80P deduction for co-operative society upheld where nominal members are recognised as members under State law.

A primary agricultural co-operative credit society claimed deduction under section 80P(2)(a)(i) despite extending credit to nominal or B class members. The text states that, under the Tamil Nadu Co-operative Societies Act, 1983, nominal or associate members were statutorily recognised as members, so the section 80P condition was satisfied. It further notes that the deduction provision must be construed liberally and that restricting "members" to voting members would create an impermissible classification within a classification. On that reasoning, the distinction between A and B class members was treated as irrelevant, and the denial of deduction was described as unsustainable.

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Issues: Whether the assessee, a primary agricultural co-operative credit society, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 despite advancing credit facilities to nominal or B class members.

Analysis: The assessee-society was governed by the Tamil Nadu Co-operative Societies Act, 1983. The definition of "member" under the State Act included an associate member, and nominal members were therefore statutorily recognised as members. Once such members fell within the statutory definition, the requirement in section 80P(2)(a)(i) stood satisfied. The deduction provision had to be construed liberally, and the Revenue's attempt to limit the expression "members" only to voting members would amount to an impermissible classification within a classification. The reasoning was also supported by the cited judicial view that the distinction between A and B class members was irrelevant for the purpose of the deduction.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i), and the denial of that benefit was unsustainable.

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