Section 80P deduction for co-operative credit society upheld where State law recognised multiple member classes and associate members.

Eligibility for deduction under section 80P(2)(a)(i) depends on the State law definition of "member" and whether the society advances credit only to members in the legal sense recognised by that law. Applying the Supreme Court's ruling in Mavilayi Service Co-operative Bank Ltd., the ITAT Chennai treated the Tamil Nadu Co-operative Societies Act, 1983 as permitting more than one class of members, including associate members. On that basis, the assessee's admission of A Class and B Class members did not by itself disqualify the primary agricultural co-operative credit society from the deduction, and the denial of deduction was set aside.

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Issues: Whether the assessee, a primary agricultural co-operative credit society governed by the Tamil Nadu Co-operative Societies Act, 1983, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 despite admitting A Class and B Class members.

Analysis: The governing State Act permits admission of two classes of members and defines a member to include an associate member. The decision of the Supreme Court in Mavilayi Service Co-operative Bank Ltd. was treated as applicable because the eligibility for deduction under section 80P(2)(a)(i) depends on the State law definition of member and on whether the society is advancing credit to members in the legal sense recognised by that law. On that basis, the assessee's admission of B Class members did not by itself disentitle it from the deduction claimed.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i) for the disputed amount, and the denial of the deduction was set aside.

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