Primary agricultural credit society deduction under Section 80P upheld; tax authorities cannot override State-law classification.

A primary agricultural credit society registered under the Kerala Cooperative Societies Act was treated as entitled to deduction under Section 80P of the Income-tax Act, notwithstanding Section 80P(4). The jurisdictional High Court's binding view was followed that once a society is classified under State cooperative law, income-tax authorities cannot re-examine that factual classification to deny the Section 80P benefit. On that basis, the deduction claim was allowed and the Revenue's challenge failed.

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Issues: Whether the assessee, a primary agricultural credit society, was entitled to deduction under Section 80P of the Income-tax Act, 1961 notwithstanding the invocation of Section 80P(4).

Analysis: The assessee was registered as a primary agricultural credit society under the Kerala Cooperative Societies Act, 1969. The jurisdictional High Court had already held that societies so classified and registered are entitled to the benefit of deduction under Section 80P(2), and that the income-tax authorities cannot re-examine the factual classification made under the State law. Following that binding decision, the assessee's claim for deduction was held to be allowable.

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

Ratio Decidendi: A primary agricultural credit society classified as such under the applicable State cooperative law is entitled to deduction under Section 80P, and the income-tax authorities cannot disregard that classification while denying the benefit.

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