Co-operative society deduction upheld where loans to associate members satisfied the statutory membership requirement.

A primary agricultural co-operative credit society was held entitled to deduction under section 80P(2)(a)(i) and section 80P(2)(iv) where credit facilities were extended to Class-B or associate members. The Tribunal noted that the Tamil Nadu Co-operative Societies Act, 1983 treats an associate member as a member, so denial of deduction on the basis of an internal A/B classification created an impermissible distinction within the statutory class of members. Deduction provisions were construed liberally, and lending to associate members satisfied the membership requirement for the claim.

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Issues: Whether a primary agricultural co-operative credit society was entitled to deduction under section 80P(2)(a)(i) and section 80P(2)(iv) of the Income-tax Act, 1961 when credit facilities were extended to Class-B or associate members.

Analysis: The definition of "member" under section 2(16) of the Tamil Nadu Co-operative Societies Act, 1983 includes an associate member. The denial of deduction was based only on the view that credit facilities were given to a separate class of members. Such a distinction amounted to creating a classification within the statutory class of members, which was impermissible. Deduction provisions are to be interpreted liberally, and the statutory recognition of associate members meant that lending to them satisfied the membership requirement for section 80P(2)(a)(i). The Tribunal also followed the view that classification of members into A and B categories does not defeat the claim for deduction.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i) and section 80P(2)(iv) of the Income-tax Act, 1961.

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