Co-operative society deduction under section 80P retained where statutory conditions for a co-operative bank were not met.

Section 80P(4) applies only to a co-operative bank satisfying the statutory conditions of a primary co-operative bank under the Banking Regulation Act, including principal business as banking, minimum paid-up share capital and reserves, and bye-laws excluding admission of other co-operative societies as members. On the society's bye-laws and governing statute, its activities were confined to members, it did not accept public deposits, and membership of other co-operative societies was permitted, so those conditions were not cumulatively met. The society was therefore not a co-operative bank within section 80P(4) and remained eligible for deduction under section 80P(2)(a)(i) in respect of income from providing credit facilities to its members.

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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), and if not, whether it was entitled to deduction under section 80P(2)(a)(i) in respect of income from providing credit facilities to its members.

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 a primary agricultural credit society or a primary co-operative agricultural and rural development bank. A primary co-operative bank must satisfy the statutory conditions under the Banking Regulation Act, including that its principal business is banking, its paid-up share capital and reserves are not less than one lakh rupees, and its bye-laws do not permit admission of any other co-operative society as a member. On the bye-laws and governing statute, the society's activities were confined to members, it did not accept deposits from the public, and its bye-laws and the Karnataka Co-operative Societies Act permitted membership of other co-operative societies, so the statutory conditions for a primary co-operative bank were not cumulatively met.

Conclusion: The assessee was not a co-operative bank within section 80P(4) and remained entitled to deduction under section 80P(2)(a)(i).

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