Co-operative credit society deduction under section 80P survives unless it is shown to be a co-operative bank

A co-operative credit society providing credit facilities to its members is not excluded from deduction under section 80P(2)(a)(i) merely because of section 80P(4). The discussed position applies where the society is not carrying on banking business as a co-operative bank and does not hold a banking licence from the RBI. On the facts described, the society remained a co-operative society rather than a co-operative bank, so the section 80P(4) exclusion did not apply and the deduction was allowable.

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Issues: Whether the assessee, a co-operative credit society, was hit by section 80P(4) of the Income-tax Act, 1961 and therefore not entitled to deduction under section 80P(2)(a)(i).

Analysis: The assessee was registered as a co-operative society and was engaged in providing credit facilities to its members. The Revenue sought to treat it as a co-operative bank or primary co-operative bank on the basis of the Banking Regulation Act, 1949 and the exclusion created by section 80P(4). The Commissioner (Appeals) and the Tribunal followed the jurisdictional High Court decisions holding that a society which is not carrying on banking business as a co-operative bank, and which does not possess a banking licence from the Reserve Bank of India, is not excluded by section 80P(4). On the facts found, the assessee remained a co-operative society entitled to the deduction.

Conclusion: The assessee was not a co-operative bank and section 80P(4) did not apply; deduction under section 80P(2)(a)(i) was allowable.

Ratio Decidendi: A co-operative society engaged in providing credit facilities to its members does not lose the benefit of section 80P(2)(a)(i) unless it is shown to be a co-operative bank carrying on banking business as such.

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