Deduction under section 80P upheld for a primary agricultural credit society; Citizen Co-operative Society distinguished on facts.

A primary agricultural credit society registered under the Kerala Co-operative Societies Act, 1969 remained eligible for deduction under section 80P(2)(a)(i) because it was classified as a primary agricultural credit society and the jurisdictional High Court had already recognised such societies' entitlement. The Tribunal distinguished Citizen Co-operative Society on the basis that that case concerned a different factual setting involving banking-like activity and members treated in substance as non-members. It held that, under the Kerala co-operative law, nominal members are recognised as members and the statutory framework did not justify treating the assessee as a co-operative bank for denying the deduction.

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Issues: Whether the assessee, 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 the Revenue's reliance on section 80P(4) and the decision in Citizen Co-operative Society.

Analysis: The assessee was registered and classified as a primary agricultural credit society, and the jurisdictional High Court had already held that such societies are entitled to deduction under section 80P(2). The Tribunal found that the Supreme Court decision in Citizen Co-operative Society was distinguishable because it dealt with a different factual setting involving a credit co-operative society carrying on banking-like activities with nominal members treated in substance as non-members. Under the Kerala Co-operative Societies Act, nominal members are recognised as members, and the statutory framework, including the Banking Regulation Act, did not justify treating the assessee as a co-operative bank for denying the deduction.

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

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