Section 80P deduction requires scrutiny of actual loan activities, with each assessment year examined separately.

Deduction under section 80P cannot be determined solely from the society's registration under co-operative law; the Assessing Officer must examine the actual business activities and verify whether loans and advances were for agricultural or non-agricultural purposes. Eligibility must be tested separately for each assessment year, with the factual character of each loan disbursement established before applying section 80P, including the effect of section 80P(4). The denial of deduction was therefore not finally upheld on the existing record and the matter was remitted for fresh factual examination in accordance with law.

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Issues: Whether the denial of deduction under section 80P(2)(a)(i) was sustainable, and whether the matter required fresh examination of the assessee-society's loan activities in the light of section 80P(4).

Analysis: The claim for deduction under section 80P cannot be decided merely on the basis of the registration certificate issued under the co-operative societies law. The Assessing Officer is required to conduct an enquiry into the actual activities of the society and examine whether the loans and advances were in fact for agricultural or non-agricultural purposes. Each assessment year has to be considered separately, and the factual nature of each loan disbursement must be verified before drawing a conclusion on eligibility under section 80P.

Conclusion: The denial of deduction was not finally sustained on the existing record and the issue was remitted to the Assessing Officer for fresh factual examination in accordance with law.

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