Co-operative credit society deduction upheld where member-only credit activity did not amount to banking business under section 80P(4).

An apex co-operative society providing credit facilities only to its member housing societies was treated as a co-operative credit society, not a co-operative bank. It did not accept deposits from the public, was not regulated as a bank by the RBI, and was not shown to be a state co-operative bank, central co-operative bank, or primary co-operative bank. As the statutory exclusion in section 80P(4) applies only to co-operative banks, it did not bar the deduction. The activity of lending credit to members therefore remained eligible under section 80P(2)(a)(i), and the Revenue's objection was rejected.

---

---

Issues: Whether the assessee, a co-operative society providing credit facilities to its member housing societies, was a co-operative bank hit by the exclusion in section 80P(4) of the Income-tax Act, 1961, or a co-operative credit society entitled to deduction under section 80P(2)(a)(i).

Analysis: The assessee was found to be an apex co-operative society whose members were primary co-operative housing societies. It did not carry on banking business in the sense of accepting deposits from the public for lending or investment, was not regulated as a bank by the Reserve Bank of India, and did not satisfy the characteristics of a co-operative bank under the Banking Regulation Act. The record did not establish that the assessee was a state co-operative bank, a central co-operative bank, or a primary co-operative bank. In the absence of proof that it was a co-operative bank, the statutory bar in section 80P(4) did not apply, and the activity of providing credit facilities to members fell within section 80P(2)(a)(i).

Conclusion: The assessee was held entitled to deduction under section 80P(2)(a)(i), and the Revenue's objection based on section 80P(4) was rejected.

Ratio Decidendi: A co-operative society that merely provides credit facilities to its members, without carrying on banking business as a co-operative bank, is not excluded by section 80P(4) and remains eligible for deduction under section 80P(2)(a)(i).

---