Primary agricultural credit society status under Kerala law governs deduction eligibility under section 80P, defeating disallowance.

A primary agricultural credit society registered and classified under the Kerala Cooperative Societies Act, 1969 is treated as eligible for deduction under section 80P(2) of the Income-tax Act, 1961. The stated legal position is that State-law classification governs the society's status for this purpose, and income-tax authorities cannot re-examine that classification to deny the benefit under section 80P(4). The jurisdictional High Court view relied on supports deduction for such societies, making the disallowance unsustainable on that footing.

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Issues: Whether a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 is entitled to deduction under section 80P(2) of the Income-tax Act, 1961, notwithstanding the disallowance made on the footing of section 80P(4).

Analysis: The assessee was shown to be a primary agricultural credit society registered under the Kerala Cooperative Societies Act, 1969 and classified as such by the competent authority. The controlling legal position, as applied, was that such classification under the State cooperative law is determinative of the society's status for the purpose of deduction under section 80P, and the Income-tax authorities cannot re-open that classification by probing into the same issue. The jurisdictional High Court decision relied on held that primary agricultural credit societies so registered and classified are entitled to the benefit of section 80P, and the disallowance based on section 80P(4) was not sustainable against them.

Conclusion: The assessee was entitled to deduction under section 80P(2); the disallowance was not justified and the issue was decided in favour of the assessee.

Ratio Decidendi: A primary agricultural credit society registered and classified under the Kerala Cooperative Societies Act, 1969 is entitled to deduction under section 80P(2) of the Income-tax Act, 1961, and the income-tax authorities cannot deny that benefit by questioning the State-law classification.

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