Primary agricultural credit society deduction under cooperative tax relief upheld despite statutory restriction.

A primary agricultural credit society registered under the Kerala Co-operative Societies Act remained entitled to income-tax deduction on its eligible cooperative income, because the Tribunal followed binding jurisdictional High Court precedent that classification by the competent State authority could not be re-examined by income-tax authorities. The restriction in section 80P(4) did not displace the society's status as recognised under the State law and the Banking Regulation Act framework. The Revenue's challenge therefore failed, and deduction under section 80P was allowed.

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Issues: Whether the assessee, a primary agricultural credit society, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 despite the restriction in section 80P(4).

Analysis: The assessee was registered as a primary agricultural credit society under the Kerala Co-operative Societies Act, 1969. The Tribunal followed the binding jurisdictional High Court ruling which held that societies so classified by the competent authority under the State Act are entitled to the benefit of section 80P. The Court accepted that the income-tax authorities could not re-examine the classification when the society stood recognised as a primary agricultural credit society under the relevant State law and the Banking Regulation Act framework.

Conclusion: The assessee was entitled to deduction under section 80P of the Income-tax Act, 1961. The Revenue's challenge failed.

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