Member-only co-operative credit societies remain eligible for deduction unless they satisfy the statutory definition of a co-operative bank.

A co-operative credit society that accepts deposits and extends credit only to its members is not treated as a co-operative bank merely on that basis, because the section 80P(4) exclusion applies only where the statutory requirements of a co-operative bank are met. Applying the distinction under the Banking Regulation Act, 1949, the assessee was found outside the exclusion and remained eligible for deduction under section 80P(2)(a)(i). The deduction was therefore upheld and the society's entitlement to tax relief as a member-based credit society was sustained.

---

---

Issues: Whether a co-operative credit society was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or was excluded as a co-operative bank by section 80P(4).

Analysis: The society accepted deposits and extended credit only to its members, and its activities were held to be materially distinct from those of a co-operative bank. The exclusion in section 80P(4) applies only to co-operative banks and not to every credit society. The decision relied on the statutory distinction under the Banking Regulation Act, 1949 and on the principle that the assessee had not been shown to satisfy the legal requirements for treatment as a co-operative bank. On that basis, the claim for deduction under section 80P(2)(a)(i) was upheld.

Conclusion: The deduction under section 80P(2)(a)(i) was held allowable and the assessee was held not to be hit by section 80P(4).

Final Conclusion: The appeal failed and the assessee's entitlement to deduction as a co-operative credit society was sustained.

Ratio Decidendi: A co-operative credit society that provides credit only to its members is not, by that reason alone, a co-operative bank for section 80P(4), and remains eligible for deduction under section 80P(2)(a)(i) unless it is shown to fall within the statutory definition of a co-operative bank.

---