Co-operative society deduction under section 80P depends on voting rights, not mere membership of ineligible members.

A co-operative society's entitlement to deduction under section 80P(2)(a)(vi) depends on whether its bye-laws restrict voting rights as required by the proviso. Where an ineligible member, such as NLC, and its nominees have no voting rights in society elections, the Board manages day-to-day affairs, and the General Body retains ultimate control, mere membership does not disqualify the society. The fact that such membership is permitted under the Tamil Nadu Co-operative Societies Act, 1983, and that registration was not revoked for any violation, supported the deduction. On these facts, the society satisfied the statutory conditions and the Revenue's challenge failed.

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Issues: Whether the assessee was entitled to deduction under section 80P(2)(a)(vi) of the Income-tax Act, 1961 despite the presence of NLC as a member and nominated members in the society.

Analysis: The decisive consideration was whether the rules and bye-laws restricted voting rights in the manner required by the proviso to section 80P(2)(a)(vi). The factual position accepted by the Tribunal was that NLC or its nominated members did not have voting rights in the elections of the society, the Board managed the affairs of the society, and the General Body retained ultimate authority. The Tribunal also noted that membership of NLC was permissible under the Tamil Nadu Co-operative Societies Act, 1983, and that there was no revocation of the society's registration for any violation. On that basis, the case was treated as governed by the earlier view in the assessee's own matter and the relevant co-operative law framework.

Conclusion: The assessee satisfied the conditions for deduction under section 80P(2)(a)(vi), and the Revenue's challenge failed.

Ratio Decidendi: Where a co-operative society's bye-laws do not confer voting rights on ineligible members or their nominees, mere membership of such persons does not defeat deduction under section 80P(2)(a)(vi).

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