Co-operative society deduction under section 80P upheld where member-only credit activity did not make it a co-operative bank.

Section 80P(4) withdraws the deduction only from a co-operative bank, not from a co-operative society merely because it lends to its members. Where the society has no banking licence, confines credit facilities to members, and does not satisfy the statutory conditions of a co-operative bank under the Banking Regulation Act, it remains eligible for deduction under section 80P(2)(a)(i). The concurrent finding that the assessees were not co-operative banks was not shown to be perverse, so the deduction was upheld and the Revenue's challenge failed.

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Issues: Whether a co-operative credit society engaged in providing credit facilities only to its members, without a banking licence, is entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or is excluded by section 80P(4) read with section 2(24)(viia) as a co-operative bank.

Analysis: The dispute was covered by earlier coordinate Bench decisions holding that section 80P(4) withdraws the deduction only from a co-operative bank and not from a co-operative society merely because it carries on the business of lending to its members. A society becomes a co-operative bank only if the statutory conditions under the Banking Regulation Act are cumulatively satisfied, including the nature of its principal business and its membership restrictions. The record showed that the assessees were co-operative societies, had no banking licence, and were confined to providing credit facilities to members. The concurrent factual finding that they were not co-operative banks was not shown to be perverse.

Conclusion: The assessees were entitled to deduction under section 80P(2)(a)(i) and were not hit by section 80P(4); the substantial questions of law were answered in favour of the assessees and against the Revenue.

Ratio Decidendi: Section 80P(4) excludes only co-operative banks, and a co-operative society providing credit facilities solely to its members remains eligible for deduction under section 80P(2)(a)(i) unless it satisfies the statutory definition of a co-operative bank under the Banking Regulation Act, 1949.

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