Co-operative credit society status preserved deduction under Section 80P where deposits were taken only from members, not the public.

A co-operative society engaged only in providing credit facilities to its members is not a co-operative bank for purposes of Section 80P of the Income-tax Act. Banking under the Banking Regulation Act requires acceptance of deposits from the public for lending or investment, whereas a credit society confined to member deposits does not carry on banking business. On the facts found, the assessee accepted deposits only from members and did not deal with the public at large. It was therefore entitled to deduction under Section 80P, and the Revenue's challenge failed.

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Issues: Whether the assessee was a co-operative credit society, and not a co-operative bank, so as to be entitled to deduction under Section 80P of the Income-tax Act, 1961.

Analysis: Section 80P grants deduction to a co-operative society in respect of specified income, but sub-section (4) excludes co-operative banks other than the specified agricultural categories. The distinction turns on the nature of the activity: banking under Section 5(b) of the Banking Regulation Act, 1949 involves acceptance of deposits from the public for lending or investment, whereas a credit society confined to providing credit facilities to its members does not answer that description. On the facts found, the assessee accepted deposits only from members and did not carry on banking business with the public at large.

Conclusion: The assessee was a co-operative credit society and not a co-operative bank, and therefore remained entitled to deduction under Section 80P; the Revenue's appeals failed.

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