Co-operative society deduction upheld where credit was extended to associate members under the statutory membership definition.

A primary agricultural co-operative credit society was held entitled to deduction where credit facilities were extended to Class-B or associate members. The Tamil Nadu Co-operative Societies Act, 1983 defines "member" to include an associate member, so Class-B members were statutorily recognised as members of the society. Denying deduction merely because services were extended to that category would create an impermissible internal classification among members in the absence of an express statutory distinction. The deduction provision was construed liberally, and the distinction between A and B categories was treated as irrelevant for the purpose of the income-tax deduction.

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

Analysis: The definition of "member" in section 2(16) of the Tamil Nadu Co-operative Societies Act, 1983 includes an associate member. On that footing, Class-B members were statutorily recognised members of the society. The denial of deduction solely because credit facilities were extended to that category amounted to making a classification within the class of members, which was not permissible in the absence of an express statutory distinction. A deduction provision of this nature was required to be construed liberally, and the Tribunal followed its earlier view that the distinction between A and B categories of members was irrelevant for the purpose of section 80P(2)(a)(i).

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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