Primary agricultural credit society deduction upheld where State-law classification binds tax authorities under section 80P.

Primary agricultural credit societies classified as such under the Kerala Co-operative Societies Act, 1969 remain entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, despite section 80P(4). The jurisdictional High Court precedent treated the State-law classification as binding on income-tax authorities, so they cannot re-examine that status to deny the deduction. The Supreme Court ruling relied on by the Revenue was distinguished as not governing societies so classified under the Kerala enactment. The section 80P benefit therefore remains available to such assessees.

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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, despite the bar in section 80P(4).

Analysis: The assessees were registered and classified as primary agricultural credit societies under the Kerala Co-operative Societies Act, 1969. The jurisdictional High Court had already held that where a society is so classified by the competent authority under the State Act, the income-tax authorities cannot re-examine that classification for denying the benefit of section 80P. The decision distinguished the Supreme Court ruling relied upon by the Revenue on the footing that it did not govern societies registered and classified as primary agricultural credit societies under the Kerala enactment.

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

Final Conclusion: The denial of deduction was not sustainable in view of the binding jurisdictional precedent, and the assessees retained entitlement to the section 80P benefit.

Ratio Decidendi: A society classified as a primary agricultural credit society under the relevant State cooperative law is entitled to deduction under section 80P, and the income-tax authorities cannot disregard that classification for the purpose of section 80P(4).

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