Section 80P deduction for credit to associate members upheld; internal member classifications cannot defeat the statutory benefit.

Credit facilities extended by a co-operative society to associate or class B members cannot be excluded from deduction under section 80P(2)(a)(i) where the governing co-operative societies law treats such persons as members. Internal classification within the society's membership structure does not justify a further restriction on the statutory expression "members" for denying the deduction. The Tribunal followed its co-ordinate Bench view and held that the revenue authorities could not create an additional member category to defeat the benefit otherwise available to a co-operative society engaged in providing credit facilities to its members.

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Issues: Whether deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 could be denied on the ground that credit facilities were extended to class B or associate members of the co-operative society.

Analysis: The assessee societies were registered under the Tamil Nadu Co-operative Societies Act, 1983, under which the definition of member includes an associate member. The classification into class A and class B members was treated as a distinction within the society's membership structure and not as a basis to exclude credit extended to associate members from the scope of section 80P(2)(a)(i). The Tribunal followed its earlier co-ordinate Bench decision and held that the revenue authorities could not create a further classification within members to deny a deduction otherwise available to a co-operative society engaged in providing credit facilities to its members.

Conclusion: The deduction under section 80P(2)(a)(i) was allowable, and denial of the claim on the ground that credit was given to class B members was unsustainable.

Ratio Decidendi: Where the governing co-operative societies law statutorily includes associate members within the expression "member", credit facilities extended to such members satisfy the membership condition for deduction under section 80P(2)(a)(i), and no further internal classification of members can be used to deny the benefit.

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