Credit facilities to members keep a cooperative society outside the cooperative bank bar and preserve section 80P deduction.

A cooperative society confined to providing credit facilities to its members, without carrying on banking business with the public, remains eligible for deduction under section 80P(2)(a)(i) and is not excluded by section 80P(4). The decisive factors were that its activities were restricted to members, its bye-laws did not authorise general banking, and the Revenue failed to show banking business within the meaning of the Banking Regulation Act, 1949. On that basis, the society was treated as distinct from a cooperative bank, and the deduction was held allowable.

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Issues: Whether a cooperative society confined to providing credit facilities to its members, without carrying on banking business, is entitled to deduction under section 80P(2)(a)(i) and not hit by section 80P(4).

Analysis: The claim for deduction depended on whether the assessee satisfied the character of a cooperative bank or remained a cooperative society. The decisive considerations were that its activities were restricted to members, its bye-laws did not permit general banking activity with the public, and the Revenue failed to show that it carried on banking business within the meaning of the Banking Regulation Act, 1949. The decision relied on the jurisdictional High Court view that a society engaged only in providing credit facilities to members is not a primary cooperative bank merely because it accepts deposits and grants loans to members.

Conclusion: The assessee was held to be a cooperative society and not a cooperative bank, and deduction under section 80P(2)(a)(i) was held allowable; the Revenue's objection was rejected.

Final Conclusion: The appeal of the Revenue failed, while the assessee's cross objection did not survive independently.

Ratio Decidendi: A cooperative society that confines its operations to providing credit facilities to its members and does not carry on banking business is not a cooperative bank for section 80P(4), and remains eligible for deduction under section 80P(2)(a)(i).

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