Section 80P deduction for co-operative credit society upheld; revision under section 263 found unsustainable.

A co-operative credit society that deals only with its members and does not hold an RBI banking licence remains eligible for deduction on income attributable to member credit facilities under section 80P(2)(a)(i). Income from deposits placed with other co-operative banks was treated as covered by section 80P(2)(d), and income from dealings with non-members had already been taxed. On that footing, section 80P(4) was held inapplicable to deny the benefit, and the Principal Commissioner had no valid basis to revise the assessment under section 263 as erroneous and prejudicial to the Revenue.

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Issues: Whether the Principal Commissioner could invoke revisional jurisdiction under section 263 of the Income-tax Act, 1961 and set aside the assessment denying deduction under section 80P in respect of a credit co-operative society.

Analysis: The assessee was found to be a co-operative credit society dealing with its members and not a co-operative bank holding an RBI licence. Deduction under section 80P(2)(a)(i) was held to be available for income attributable to credit facilities provided to members, while income from dealings with non-members had already been brought to tax. Income arising from deposits with other co-operative banks was treated as covered by section 80P(2)(d). On that footing, section 80P(4) was held inapplicable, and the revisional order was found to rest on a appreciation of facts and law, with no valid basis to hold the assessment order erroneous and prejudicial to the interests of the Revenue.

Conclusion: The revision under section 263 was unsustainable and the assessee was entitled to succeed.

Ratio Decidendi: A co-operative credit society that is not a co-operative bank and does not hold an RBI banking licence remains entitled to deduction under section 80P for eligible income from members and from investments with other co-operative societies, and section 80P(4) cannot be used to deny such benefit unless the statutory conditions for exclusion are satisfied.

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