Section 80P deduction survives where a co-operative society is not a primary co-operative bank under the statutory definition.

A co-operative society remains eligible for deduction under section 80P(2)(a)(i) unless it satisfies the statutory conditions of a co-operative bank, because section 80P(4) withdraws the benefit only from such banks. The definition of a primary co-operative bank requires, among other conditions, that the principal business be banking and that the bye-laws do not permit admission of any other co-operative society as a member. On the facts noted, the assessee did not carry on banking business in the relevant sense and its bye-laws allowed other co-operative societies to become members, so it was not a primary co-operative bank and the section 80P(4) bar did not apply.

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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 and whether section 80P(4) barred the claim on the footing that the assessee was a co-operative bank.

Analysis: Deduction under section 80P(2)(a)(i) is available to a co-operative society carrying on the business of banking or providing credit facilities to its members. Section 80P(4) withdraws that benefit only from a co-operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. The statutory definition of a primary co-operative bank requires satisfaction of all the specified conditions, including that the principal business is banking and that the bye-laws do not permit admission of any other co-operative society as a member. On the facts found, the assessee did not carry on banking business in the sense relevant to the definition, and its bye-laws permitted admission of other co-operative societies as members. It therefore did not answer the description of a primary co-operative bank, and section 80P(4) did not apply.

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

Ratio Decidendi: Section 80P(4) excludes only a co-operative bank from the benefit of section 80P, so a co-operative society that does not satisfy the statutory conditions of a primary co-operative bank remains eligible for deduction under section 80P(2)(a)(i) in respect of income from activities with its members.

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