Section 80P deduction for co-operative societies turns on bye-laws and whether the entity is a co-operative bank.

Section 80P(2)(a)(i) allows deduction to a co-operative society carrying on banking or credit activities for members, but section 80P(4) excludes only a society that satisfies the statutory definition of a co-operative bank. That definition requires, among other conditions, that the bye-laws do not permit admission of another co-operative society as a member. The assessee's objects and deposits suggested banking activity, but the bye-laws were not on record, so the third statutory condition could not be verified. The matter was remanded to the Assessing Officer to examine the bye-laws and determine whether section 80P(4) applied; deduction would depend on whether another co-operative society could be admitted as a member.

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Issues: Whether the assessee co-operative society was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or was excluded by section 80P(4) as a co-operative bank, and whether the bye-laws permitted admission of another co-operative society as a member.

Analysis: Section 80P(2)(a)(i) grants deduction to a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, while section 80P(4) excludes only a co-operative bank other than the specified agricultural credit bodies. A co-operative society becomes a primary co-operative bank only if it satisfies all the statutory conditions, including that its primary object or principal business is banking and that its bye-laws do not permit admission of any other co-operative society as a member. The assessee's objects and deposits indicated banking activity, but the record did not contain its bye-laws, which were necessary to determine whether the third statutory condition was met. The applicability of section 80P(4) therefore depended on examination of the bye-laws and the membership clause.

Conclusion: The matter was remanded to the Assessing Officer to verify the assessee's bye-laws and determine whether section 80P(4) applied; if the bye-laws permitted admission of another co-operative society, deduction under section 80P(2)(a)(i) would be available, and if not, the assessee would be treated as a primary co-operative bank and denied the deduction.

Ratio Decidendi: Exclusion under section 80P(4) applies only when a co-operative society satisfies the statutory definition of a co-operative bank, including the condition that its bye-laws prohibit admission of any other co-operative society as a member.

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