Co-operative society deduction under section 80P(2)(a)(i) remains available where section 80P(4) does not apply.

Section 80P(4) excludes only co-operative banks functioning at par with commercial banks, while a co-operative society providing credit facilities to its members can still claim deduction under section 80P(2)(a)(i). The absence of an RBI banking licence is a material indicator that the entity is not a co-operative bank. The provision is to be construed liberally in favour of the assessee, and once the society is outside section 80P(4), deduction cannot be denied merely because it advances credit to members. The note concludes that the deduction under section 80P(2)(a)(i) is allowable.

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Issues: Whether the assessee, a co-operative society engaged in providing credit facilities and allied activities, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or whether the benefit was barred by section 80P(4).

Analysis: Section 80P(4) excludes only co-operative banks that function at par with commercial banks, while section 80P(2)(a)(i) continues to benefit a co-operative society carrying on the business of banking or providing credit facilities to its members. The absence of a banking licence from the Reserve Bank of India is a material indicator that the assessee is not a co-operative bank. The provision is a benevolent one and must be construed liberally, with ambiguity resolved in favour of the assessee. The later Supreme Court exposition confirms that once the society is not hit by the exclusion in section 80P(4), the deduction under section 80P(2)(a)(i) cannot be denied merely because the society also advances credit to its members.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i), and the denial of the deduction was unsustainable.

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