Section 80P deduction for a co-operative credit society survives where it is not a co-operative bank and lacks RBI banking licence.

Section 80P remains a beneficial deduction provision and is to be construed liberally in favour of a co-operative credit society. Section 80P(4) excludes only a co-operative bank, and a credit society does not fall within that exclusion unless it satisfies the statutory conditions of a co-operative bank under the Banking Regulation Act; the absence of an RBI banking licence is material in determining that status. Interest earned from deposits with co-operative banks is also treated as deductible under section 80P(2)(d) on the stated reasoning. On this analysis, the assessee was not hit by section 80P(4) and the deduction was allowable.

---

---

Issues: Whether the assessee was a co-operative bank so as to be excluded from deduction under section 80P(4), and whether interest earned from deposits with co-operative banks remained deductible under section 80P(2)(d).

Analysis: The deduction under section 80P is a beneficial provision and has to be construed liberally in favour of the assessee. Section 80P(4) excludes only co-operative banks, and the statutory meaning of a co-operative bank under the Banking Regulation Act requires satisfaction of the relevant conditions, including the regulatory framework applicable to banking business. The absence of an RBI banking licence is material in determining whether a co-operative credit society can be treated as a co-operative bank. The Supreme Court authorities relied upon settled that a co-operative credit society is not to be treated as a co-operative bank merely because it undertakes lending or credit activities for members.

Conclusion: The assessee was not hit by section 80P(4), and the deduction claimed was allowable. The Revenue's challenge failed.

Ratio Decidendi: A co-operative credit society does not become a co-operative bank for section 80P(4) unless it satisfies the statutory conditions for a co-operative bank, and the absence of an RBI banking licence is decisive for that purpose.

---