Co-operative credit society deduction under section 80P upheld where lending was confined to members and no banking activity was shown.

A co-operative credit society that accepts deposits and extends credit only to its members, without carrying on banking with the public or having the statutory attributes of a co-operative bank, is not treated as a primary co-operative bank for section 80P(4). The Tribunal held that section 80P(4) did not exclude the society from deduction under section 80P(2)(a)(i), and the disallowance made by the Assessing Officer was unsustainable.

---

---

Issues: Whether a co-operative credit society, which provides credit facilities only to its members, is hit by section 80P(4) of the Income-tax Act, 1961 and therefore denied deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The Tribunal noted that the society accepted deposits and extended credit only to members and did not carry on banking with the public at large. It accepted the view that for section 80P(4) to apply, the entity must in substance answer the description of a co-operative bank or primary co-operative bank. On the facts found, the society was not authorised to undertake the banking activities characteristic of a co-operative bank and was not shown to satisfy the statutory attributes of a primary co-operative bank.

Conclusion: The society was not hit by section 80P(4) and remained entitled to deduction under section 80P(2)(a)(i).

Final Conclusion: The disallowance made by the Assessing Officer was not sustainable and the assessee's claim for deduction was upheld.

Ratio Decidendi: A co-operative credit society that provides credit only to its members and does not function as a co-operative bank is not excluded by section 80P(4) and is eligible for deduction under section 80P(2)(a)(i).

---