Section 80P deduction for member-only co-operative credit societies upheld; such societies are not co-operative banks.

A co-operative credit society that accepts deposits and grants loans only to its members is not treated as a co-operative bank for section 80P purposes. Applying the definition of banking under section 5(b) of the Banking Regulation Act, the tribunal noted that dealings confined to members do not amount to banking with the public at large. The exclusion in section 80P(4) applies only to co-operative banks, and earlier binding decisions in the assessee's own case supported that position. Deduction under section 80P was therefore available, and the Revenue's challenge failed.

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Issues: Whether a co-operative credit society, which accepts deposits and grants loans only to its members, is to be treated as a co-operative bank and thereby denied deduction under section 80P of the Income-tax Act, 1961.

Analysis: The assessee was found to be a co-operative credit society engaged exclusively in providing credit facilities to its members and not in transacting with the public at large. The distinction between banking business and the assessee's activities was examined with reference to the definition of banking under section 5(b) of the Banking Regulation Act, 1949. On that basis, deposits accepted only from members were held not to amount to banking business in the statutory sense. The earlier binding decisions in the assessee's own case and the principle that the exclusion in section 80P(4) applies only to co-operative banks supported the view that the assessee did not fall within the exclusionary provision.

Conclusion: The assessee was held entitled to deduction under section 80P, and the Revenue's challenge failed.

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