Section 80P deduction for co-operative societies confirmed where the section is applied liberally and the bank exclusion is not triggered.

Section 80P remains a beneficial deduction provision and must be construed liberally; the Supreme Court in Mavilayi Service Co-operative Bank Ltd. rejected the importation of an agricultural-purpose limitation into section 80P(2)(a)(i). It further clarified that section 80P(4) is a specific exclusion applying only to co-operative banks carrying on banking business with an RBI licence. Applying that binding clarification, the ITAT Cochin held that a primary agricultural credit co-operative society was entitled to the deduction claimed under section 80P, and the denial by the lower authorities could not be sustained.

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Issues: Whether the assessee, a primary agricultural credit co-operative society, was entitled to deduction under section 80P of the Income-tax Act, 1961 in view of the Supreme Court's ruling in Mavilayi Service Co-operative Bank Ltd.

Analysis: The Supreme Court had set aside the Full Bench view which had denied deduction by importing an agricultural-purpose limitation into section 80P(2)(a)(i). It clarified that section 80P is a beneficial provision and must be construed liberally, and that section 80P(4) operates as a specific exclusion only for co-operative banks carrying on banking business with RBI licence. The Tribunal applied that binding clarification and held that the assessee was entitled to the deduction claimed under section 80P.

Conclusion: The assessee was entitled to deduction under section 80P and the denial by the lower authorities could not be sustained.

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