Primary agricultural credit societies under Kerala law remain eligible for section 80P deduction; Citizens Co-operative Society distinguished.

Primary agricultural credit societies registered and classified under the Kerala Co-operative Societies Act, 1969 were treated as eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act. The Tribunal followed Chirakkal Service Co-operative Bank Ltd., holding that such statutory classification entitled the societies to the deduction despite section 80P(4). Citizens Co-operative Society Ltd. was distinguished because it involved different facts, including treatment of nominal members as non-members under the relevant law, whereas the Kerala Act includes nominal members within the definition of member. The Banking Regulation Act did not alter the societies' status for section 80P purposes.

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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 the ruling in Citizens Co-operative Society Ltd.

Analysis: The assessees were registered and classified as primary agricultural credit societies under the Kerala Co-operative Societies Act, 1969. The Tribunal followed the jurisdictional High Court in Chirakkal Service Co-operative Bank Ltd., which held that such classification entitled the societies to deduction under section 80P. The decision in Citizens Co-operative Society Ltd. was distinguished on the ground that it dealt with different facts, including receipt of deposits from nominal members treated as non-members under the relevant law, whereas under the Kerala Co-operative Societies Act nominal members are included within the definition of member. The Tribunal also noted that the Banking Regulation Act did not alter the assessees' status as primary agricultural credit societies for the purpose of section 80P.

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

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