Section 80P deduction upheld for a primary agricultural credit society under Kerala co-operative law despite Revenue challenge.

A primary agricultural credit society registered under the Kerala Co-operative Societies Act was held entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act notwithstanding section 80P(4). The Tribunal followed its earlier view and the jurisdictional High Court's ruling that a society so classified under the State law remains eligible for section 80P benefits. It distinguished Citizens Co-operative Society because that case involved a credit co-operative society acting through nominal members in a manner inconsistent with the governing law, whereas the Kerala Act includes nominal members within the statutory definition of member. The Tribunal also noted no disqualifying activity was shown and the tax authorities could not reclassify the society contrary to its statutory status.

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Issues: Whether the assessee, being a primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 despite section 80P(4) and the decision in Citizens Co-operative Society.

Analysis: The Tribunal followed its earlier decision in an identical matter and held that the jurisdictional High Court had already ruled that a society classified as a primary agricultural credit society under the Kerala Co-operative Societies Act is entitled to the benefit of section 80P. It distinguished Citizens Co-operative Society on the ground that that case involved a credit co-operative society operating with nominal members in a manner contrary to the governing law, whereas under the Kerala Co-operative Societies Act nominal members are included within the statutory definition of member. It also noted that the assessee was not shown to be carrying on activities disqualifying it from the statutory benefit and that the authorities under the Income-tax Act could not recharacterise the society contrary to its statutory classification.

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

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