Section 80P deduction for co-operative banking covers income from non-members; "or" is read disjunctively, not conjunctively.

Section 80P(2)(a)(i) grants deduction to a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, and the two expressions describe distinct qualifying activities. The provision cannot be read conjunctively by treating "or" as "and", because banking business is wider than credit facilities to members alone. On that construction, income attributable to banking activity is not disqualified merely because it arises from transactions with non-members, and the deduction remains available where the statutory conditions are otherwise met.

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Issues: Whether a co-operative bank claiming deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 is entitled to exemption on income attributable to banking activities carried on with non-members, and whether the word "or" in that provision should be read as "and".

Analysis: The provision grants deduction to a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members. The two expressions denote distinct activities, and the word "or" cannot be read conjunctively as "and". The scope of banking business is wider than providing credit facilities to members alone, and the exemption is not confined only to transactions with members. The provision is intended to encourage the co-operative sector, and the heads of exemption under section 80P are separate and distinct. Accordingly, income attributable to banking activities is not excluded merely because the transactions are with non-members.

Conclusion: The assessee was entitled to deduction under section 80P(2)(a)(i) on income attributable to banking activities, including income from non-members.

Ratio Decidendi: For purposes of section 80P(2)(a)(i) of the Income-tax Act, 1961, the phrase "carrying on the business of banking or providing credit facilities to its members" creates separate qualifying activities, and banking income is not disqualified merely because it arises from dealings with non-members.

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