Co-operative society deduction under section 80P depends on statutory co-operative bank status, not merely banking-like activities.

A co-operative credit society is excluded from deduction under section 80P(2)(a)(i) only if it falls within the statutory meaning of a co-operative bank under section 80P(4) and the Banking Regulation Act, 1949. The classification turns on cumulative statutory conditions, including banking business as the principal object, required paid-up share capital and reserves, and restrictive membership bye-laws. Where the society mainly provides credit facilities to members and the statutory criteria for a primary co-operative bank are not all satisfied, the exclusion does not apply. Mere banking-like activity or acceptance of deposits does not by itself bring the society within section 80P(4).

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Issues: Whether the assessee co-operative credit society was a co-operative bank hit by section 80P(4) of the Income-tax Act, 1961, or whether it remained eligible for deduction under section 80P(2)(a)(i).

Analysis: The deduction under section 80P(2)(a)(i) applies to a co-operative society carrying on banking business 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 co-operative bank, for this purpose, must satisfy the statutory definition of a primary co-operative bank under the Banking Regulation Act, 1949, including the conditions relating to banking business as the principal object, minimum paid-up share capital and reserves, and restrictive membership bye-laws. On the facts found, the society accepted deposits not only from members but also from non-members, satisfied the capital condition, but its bye-laws permitted admission of other co-operative societies as members. As all the required conditions were not cumulatively satisfied, it could not be treated as a primary co-operative bank.

Conclusion: The assessee was not hit by section 80P(4) and remained entitled to deduction under section 80P(2)(a)(i); the revenue's appeal was therefore without merit.

Ratio Decidendi: A co-operative society is denied deduction under section 80P only if it is shown to be a co-operative bank within the statutory definition; mere engagement in banking-like activities or provision of credit facilities to members does not by itself attract the exclusion in section 80P(4).

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