Co-operative society credit facilities to members remain eligible for deduction where banking attributes under section 80P(4) are absent

A co-operative society that provides credit facilities only to its members remains eligible for deduction under section 80P(2)(a)(i) unless it satisfies the statutory attributes of a co-operative bank under the Banking Regulation Act, 1949. Section 80P(4) withdraws the deduction only from co-operative banks, and the exclusion does not apply where the society does not accept deposits from the public or extend banking facilities of the kind contemplated by banking law. On the stated facts, the assessee was not treated as a co-operative bank and continued to qualify for the deduction.

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Issues: Whether the assessee-society was a co-operative bank hit by section 80P(4) of the Income-tax Act, 1961, or whether it remained entitled to deduction under section 80P(2)(a)(i) for income from providing credit facilities to its members.

Analysis: The deduction under section 80P(2)(a)(i) applies to profits attributable to a co-operative society carrying on the business of providing credit facilities to its members. Section 80P(4) withdraws that benefit only from a co-operative bank as understood under the Banking Regulation Act, 1949. The assessee's activities were confined to its members, it did not accept deposits from the public, and it did not extend banking facilities of the kind contemplated by the banking definition. On those facts, the statutory attributes of a co-operative bank were not satisfied. The view was consistent with the governing judicial position that societies dealing only with members remain outside the exclusion in section 80P(4).

Conclusion: The assessee was not a co-operative bank within section 80P(4) and remained eligible for deduction under section 80P(2)(a)(i).

Ratio Decidendi: A co-operative society that confines its lending activity to members and does not satisfy the statutory attributes of banking under the Banking Regulation Act, 1949 is not excluded from deduction under section 80P(2)(a)(i) by section 80P(4) of the Income-tax Act, 1961.

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