Section 80P exclusion applies only to co-operative banks, preserving deduction for eligible credit co-operative societies.

Section 80P(4) is confined to co-operative banks under Part V of the Banking Regulation Act, 1949, and does not extend to a credit co-operative society that provides credit facilities to its members. On that basis, a deduction under section 80P(2)(a)(i) remains available to such a society. Revisional jurisdiction under section 263 requires an order to be both erroneous and prejudicial to the interests of the Revenue; where the deduction is legally permissible, an assessment allowing it is not erroneous. The revisional order was therefore quashed and the deduction claim sustained.

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Issues: (i) Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment allowing deduction under section 80P(2)(a)(i); (ii) Whether section 80P(4) applies to a credit co-operative society carrying on the business of providing credit facilities to its members.

Issue (i): Whether the Principal Commissioner was justified in invoking revisional jurisdiction under section 263 of the Income-tax Act, 1961 in respect of the assessment allowing deduction under section 80P(2)(a)(i)

Analysis: Revisional power can be exercised only when the assessment order is both erroneous and prejudicial to the interests of the Revenue. The assessment had allowed deduction on the footing that the assessee was a co-operative society engaged in providing credit facilities to its members. Once the legal position on the applicability of section 80P(4) is accepted in favour of such societies, the assessment cannot be treated as erroneous for allowing the deduction.

Conclusion: The revision under section 263 was not sustainable.

Issue (ii): Whether section 80P(4) applies to a credit co-operative society carrying on the business of providing credit facilities to its members

Analysis: Section 80P(4) excludes only co-operative banks, as understood with reference to Part V of the Banking Regulation Act, 1949. A co-operative society that is not a co-operative bank and does not hold itself out as such remains entitled to deduction under section 80P(2)(a)(i). The decision followed the settled view that the exclusion is confined to co-operative banks and does not extend to credit co-operative societies merely because they accept deposits from and advance credit to members.

Conclusion: Section 80P(4) does not apply to the assessee, and deduction under section 80P(2)(a)(i) is allowable.

Final Conclusion: The revisional order was quashed and the assessee's claim for deduction was sustained, resulting in relief to the assessee.

Ratio Decidendi: The exclusion in section 80P(4) applies only to co-operative banks and cannot be extended to a co-operative society that is not a co-operative bank; consequently, an assessment allowing deduction under section 80P(2)(a)(i) in such a case is neither erroneous nor prejudicial to the interests of the Revenue.

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