Section 80P deduction turns on co-operative bank status, with bye-laws and banking activity requiring fresh examination.

Section 80P deduction depends on whether the assessee falls within the co-operative bank exclusion in section 80P(4). The Tribunal noted that the assessee's lending and deposit-taking activities indicated banking activity, and that the Banking Regulation Act, 1949 definitions of co-operative bank and primary co-operative bank govern the exclusion. It also found that the plea based on the bye-laws permitting admission of other co-operative societies as members had not been properly adjudicated and the bye-laws were not reliably on record. The matter was therefore restored to the Assessing Officer for fresh examination of the assessee's status under the Banking Regulation Act and its entitlement to deduction under section 80P(1) read with section 80P(2)(a)(i).

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Issues: Whether the assessee was entitled to deduction under section 80P(1) read with section 80P(2)(a)(i) of the Income-tax Act, 1961, and whether it fell within the exclusion for a co-operative bank under section 80P(4) of the Income-tax Act, 1961.

Analysis: The assessee's lending and deposit-taking activities showed that its principal business was not confined to agricultural credit and that it was carrying on banking activity. The definition of banking under the Banking Regulation Act, 1949 and the statutory definitions of co-operative bank and primary co-operative bank were relevant because section 80P(4) adopts those concepts for exclusion from deduction. However, a specific plea that the bye-laws permitted admission of other co-operative societies as members had not been adjudicated by the first appellate authority, and the bye-laws were not on reliable record before the Tribunal. That factual aspect was material to determine whether the assessee was a primary co-operative bank or otherwise a co-operative bank within the Banking Regulation Act, 1949.

Conclusion: The matter was restored to the Assessing Officer for fresh examination of whether the assessee is a co-operative bank under the Banking Regulation Act, 1949 and, accordingly, whether it is entitled to deduction under section 80P(1) read with section 80P(2)(a)(i) of the Income-tax Act, 1961.

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