Co-operative society deduction under Section 80P upheld for income from nominal members; Section 80P(4) did not apply.

Income from loans advanced to Class B or nominal members qualified for deduction under Section 80P(2)(a)(i) because such members were treated as "members" under the governing cooperative law. The Court rejected a narrower view confined to voting members, holding that such a restriction would create an impermissible classification within a taxing provision. It also accepted that the assessee was not carrying on the business of a co-operative bank, so Section 80P(4) did not bar the claim on the facts presented. The deduction under Section 80P(2)(a)(i) was therefore upheld.

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Issues: Whether the assessee was entitled to deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961 in respect of income from loans advanced to Class B or nominal members, and whether Section 80P(4) barred the deduction.

Analysis: The Court noted that the controversy was covered by its earlier decision in the assessee's own case and by the coordinate bench decisions relied upon below. The reasoning accepted that nominal or associate members recognised under the governing cooperative law fall within the expression "members" for the purpose of Section 80P(2)(a)(i). It was also held that limiting the benefit only to voting members would amount to an impermissible classification within classification in a taxing provision. The Court further accepted that the assessee was not carrying on the business of a co-operative bank and that the bar in Section 80P(4) did not defeat the claim in the present factual setting.

Conclusion: The deduction under Section 80P(2)(a)(i) was held to be available to the assessee, and the objection based on Section 80P(4) was rejected.

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