Primary agricultural credit society status supports section 80P deduction and limits revision under section 263.

A society registered and classified as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969 remains entitled to deduction under section 80P(2) of the Income-tax Act where that statutory classification is supported by its registration certificate and bye-laws. The jurisdictional High Court's binding view was that income-tax authorities cannot look beyond the State-law classification to deny the benefit. On that basis, the revisionary exercise under section 263 could not be sustained as erroneous and prejudicial to the interests of the Revenue, and the deduction under section 80P(2) was maintained.

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Issues: Whether the revisionary order under section 263 of the Income-tax Act, 1961 was justified in denying deduction under section 80P(2) of the Income-tax Act, 1961 to a society registered and classified as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969.

Analysis: The assessee produced its registration certificate and bye-laws showing that it was classified as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969. The jurisdictional High Court had already held that societies so registered and classified are entitled to deduction under section 80P, and that the income-tax authorities cannot probe beyond such statutory classification under the State law for the purpose of denying the benefit. In view of that binding position, the conclusion that the assessment orders were erroneous and prejudicial to the interests of the Revenue could not be sustained.

Conclusion: The revision under section 263 was not justified and the assessee remained entitled to deduction under section 80P(2).

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