Co-operative credit society deduction under section 80P upheld where member-only lending is not banking business.

A co-operative credit society that confines lending to its members and does not carry on banking business is outside section 80P(4) because it is not a co-operative bank under section 5(b) of the Banking Regulation Act. On that basis, deduction under section 80P(2)(c) remains available within the prescribed monetary limit, and interest or dividend income received from other co-operative societies qualifies under section 80P(2)(d) where the statutory conditions are satisfied.

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Issues: Whether the assessee, a co-operative credit society dealing only with its members, was hit by section 80P(4) of the Income-tax Act, 1961 and was consequently ineligible for deduction under section 80P(2)(c) and section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The assessee's activities were confined to providing credit facilities to its members and did not amount to banking business or banking activities as understood under section 5(b) of the Banking Regulation Act, 1949. On that basis, section 80P(4) was held inapplicable. Once the society was found not to be a co-operative bank, the claim under section 80P(2)(c) was allowed since the deduction claimed was within the prescribed monetary limit, and the claim under section 80P(2)(d) was also allowed in respect of income earned by way of interest and dividend from other co-operative societies.

Conclusion: The deductions under section 80P(2)(c) and section 80P(2)(d) were held allowable in favour of the assessee.

Ratio Decidendi: A co-operative society that restricts its credit activities to its members and does not conduct banking business is not hit by section 80P(4), and its eligible income can qualify for deduction under section 80P where the statutory conditions are otherwise satisfied.

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