Primary agricultural credit society status governs deduction eligibility, and tax authorities cannot override the State classification.

Primary agricultural credit societies classified under the Kerala Co-operative Societies Act, 1969 were treated as entitled to deduction for income from co-operative credit activities, because their statutory status as primary agricultural credit societies had already been established under the State co-operative law. The income-tax authorities were not permitted to re-examine that classification to deny relief. On that reasoning, the exclusion in Section 80P(4) was held not to defeat the claim of societies falling within the protected category recognised under the relevant State law and the banking regulation framework.

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Issues: Whether primary agricultural credit societies registered under the Kerala Co-operative Societies Act, 1969 are entitled to deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961 and whether Section 80P(4) bars such deduction.

Analysis: The assessees were admittedly primary agricultural credit societies registered and classified under the Kerala Co-operative Societies Act, 1969. The governing principle applied was that once a society is so classified by the competent authority under the State co-operative law and its character as a primary agricultural credit society is established, the Income-tax authorities cannot undertake a contrary probe into that status for denying Section 80P relief. On that basis, the statutory exclusion in Section 80P(4) was held not to defeat the claim of societies falling within the protected category recognized by the State law and the Banking Regulation Act framework.

Conclusion: The assessees were held entitled to deduction under Section 80P(2)(a)(i), and the Revenue's objection based on Section 80P(4) failed.

Final Conclusion: The appeals were dismissed and the deduction claim of the assessee-societies stood upheld.

Ratio Decidendi: A society classified as a primary agricultural credit society under the relevant State co-operative law is entitled to deduction under Section 80P where its statutory status is established, and the income-tax authorities cannot disregard that classification to deny the benefit.

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