Primary co-operative bank test under tax law depends on cumulative statutory conditions, not incidental non-member deposits.

A co-operative society is excluded from deduction under Section 80P only if it satisfies the cumulative conditions of a primary co-operative bank under the Banking Regulation Act, including principal business as banking, prescribed capital and reserves, and a bye-law barring admission of other co-operative societies as members. Incidental receipt of deposits from non-members does not by itself establish banking as the principal business, and bye-laws permitting deposits from members do not amount to authorisation to accept public deposits. On the facts noted, the society did not meet the statutory tests and remained entitled to deduction under Section 80P(2)(a)(i).

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Issues: Whether the assessee society was a primary co-operative bank carrying on banking business so as to be excluded from deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961 by virtue of Section 80P(4) of the Income-tax Act, 1961.

Analysis: For the assessee to be treated as a primary co-operative bank, the cumulative conditions under Section 5(ccv) of the Banking Regulation Act, 1949 had to be satisfied, namely that its principal business was banking, its paid-up share capital and reserves were not below the prescribed threshold, and its bye-laws prohibited admission of any other co-operative society as a member. The finding that the assessee carried on banking business was not supported by the record, as the receipt of deposits from non-members was insignificant and the bye-laws did not authorise acceptance of deposits from the public merely because deposits could be received from members. The bye-laws also did not contain the mandatory prohibition against admission of other co-operative societies. The issue had already been concluded by the earlier Division Bench decision, and no perversity was shown in the concurrent factual findings.

Conclusion: The assessee was not a primary co-operative bank and remained entitled to deduction under Section 80P(2)(a)(i); the revenue's appeal failed.

Ratio Decidendi: A co-operative society is not excluded from deduction under Section 80P unless the cumulative statutory conditions for a primary co-operative bank are satisfied, and incidental dealings with non-members do not by themselves establish that the society's principal business is banking.

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