Primary agricultural credit societies retain section 80P deduction when statutorily classified under the Kerala co-operative law.

Primary agricultural credit societies registered and classified under the Kerala Co-operative Societies Act remained eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, despite section 80P(4), where their statutory status placed them within the protected category. The Tribunal treated the jurisdictional High Court ruling in Chirakkal Service Co-operative Bank Ltd. as controlling and distinguished Citizens Co-operative Society Ltd. on facts, noting that the latter involved nominal members treated as non-members. It also held that the Assessing Officer could not disregard the competent authority's classification, and that the Banking Regulation Act did not apply in the manner urged by the Revenue.

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Issues: Whether primary agricultural credit societies registered under the Kerala Co-operative Societies Act, 1969 were entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 notwithstanding section 80P(4), and whether the Supreme Court decision in Citizens Co-operative Society Ltd. displaced the jurisdictional High Court ruling in Chirakkal Service Co-operative Bank Ltd.

Analysis: The assessees were primary agricultural credit societies duly registered and classified under the State Co-operative Societies Act. The governing jurisdictional High Court ruling had held that once such classification exists, the societies are entitled to deduction under section 80P. The earlier Supreme Court decision relied on by the Revenue was distinguished on facts, because it dealt with a credit co-operative society whose activities involved deposits and lending to nominal members treated there as non-members, unlike the present cases where nominal members were members under the Kerala Act. The Tribunal also noted that the Banking Regulation Act does not apply to primary agricultural credit societies in the manner suggested by the Revenue, and that the Assessing Officer could not disregard the statutory classification recorded by the competent authority.

Conclusion: The assessees were entitled to deduction under section 80P(2)(a)(i), and the Revenue's challenge failed.

Ratio Decidendi: A primary agricultural credit society duly classified under the relevant State co-operative law remains eligible for deduction under section 80P unless the facts legally establish that it is functioning as a co-operative bank or otherwise outside the protected statutory category.

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