Co-operative credit society deduction upheld where member-only lending did not amount to banking business under section 80P(4).

A co-operative credit society that accepted deposits only from members and provided credit facilities only to members was treated as eligible for deduction under section 80P(2)(a)(i). The absence of banking features such as cheque books, drafts, or dealings with the general public meant the society was not carrying on banking business as a co-operative bank, so the exclusion under section 80P(4) did not apply. The analysis also noted that there was no material showing operation on the strength of an RBI banking licence, and the view aligned with the assessee's earlier year and similar High Court guidance. The society remained entitled to the deduction.

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Issues: Whether the assessee, a co-operative credit society providing credit facilities only to its members, was entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or whether the exclusion under section 80P(4) applied on the footing that it was a co-operative bank carrying on banking business.

Analysis: The assessee's activities were confined to accepting deposits from members and providing credit facilities to members, without banking facilities such as cheque books, drafts or dealings with the general public. The factual basis for treating it as a co-operative bank was absent, and there was no material to show that it carried on banking business on the strength of an RBI licence. The issue was consistent with the assessee's own earlier year, where similar activities were held not to attract the restriction in section 80P(4). The view taken by the first appellate authority was also in line with the Bombay High Court's decision relied upon in similar factual settings.

Conclusion: The assessee was not hit by section 80P(4) and was entitled to deduction under section 80P(2)(a)(i).

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