Co-operative credit society exemption under section 80P survives where lending is confined to members and not banking business.

A co-operative credit society confined to accepting deposits and extending finance only to its members was not carrying on banking business within section 5(b) of the Banking Regulation Act, 1949, and therefore did not fall within the exclusion in section 80P(4). The provision applies to co-operative banks, not to every co-operative credit society. As the society did not satisfy the statutory definition of a co-operative bank under Part V of the Banking Regulation Act, the authorities cited by the Revenue were distinguished on facts, and deduction under section 80P(2)(a)(i) remained available.

---

---

Issues: Whether a co-operative credit society providing credit facilities only to its members is hit by section 80P(4) of the Income-tax Act, 1961 and thereby denied deduction under section 80P(2)(a)(i).

Analysis: The society's activity was confined to accepting deposits and extending finance only to members, and it was not carrying on banking business as understood under section 5(b) of the Banking Regulation Act, 1949. The exclusion in section 80P(4) applies to co-operative banks and not to every co-operative credit society. On the facts, the society did not answer the statutory definition of a co-operative bank under Part V of the Banking Regulation Act, 1949, and the authorities relied on by the Revenue were distinguished on facts.

Conclusion: Section 80P(4) did not apply. The assessee remained entitled to deduction under section 80P(2)(a)(i).

---