Section 80P deduction turns on co-operative bank status under banking law and bye-laws, requiring factual verification before eligibility is decided.

Deduction under section 80P depends on whether a co-operative society satisfies the statutory test of a co-operative bank under the Banking Regulation Act, 1949, read with its bye-laws and the governing co-operative law. Mere classification as a Primary Agricultural Credit Society does not by itself settle eligibility where the bye-laws permit banking activity with members and non-members. Because the bye-laws were not available in usable form, factual verification was required before deciding whether section 80P(4) applied and what deduction, if any, remained available. The matter was therefore remitted for reconsideration on the assessee's eligibility and the extent of deduction.

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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 the matter had to be remanded to determine if it was a co-operative bank so as to attract section 80P(4).

Analysis: The assessee claimed deduction on the entirety of its profits from banking activity. The Tribunal noted that the Kerala Co-operative Societies Act permits a society, through its bye-laws, to accept deposits from and lend to non-members, and that the relevant inquiry under section 80P is whether the assessee answers the description of a co-operative bank under the Banking Regulation Act, 1949. The Tribunal further noted that classification as a Primary Agricultural Credit Society does not by itself conclude eligibility where the statutory test under the banking law and the bye-laws has to be applied. Since the bye-laws were not available on record in a usable form, the matter required factual examination by the Assessing Officer on the basis of the bye-laws, the Kerala Act, and the Banking Regulation Act, 1949.

Conclusion: The issue was remitted to the Assessing Officer to determine the assessee's eligibility for deduction under section 80P(1) read with section 80P(2)(a)(i) and the extent of the deduction, depending on whether it is or is not a co-operative bank.

Final Conclusion: The appeal was allowed only for statistical purposes and the deduction claim was left for reconsideration on remand.

Ratio Decidendi: For deduction under section 80P, the decisive test is whether the assessee is a co-operative bank under the Banking Regulation Act, 1949, as applied through its bye-laws and the governing co-operative law; if that issue is unresolved on the record, the matter must be remanded for factual determination.

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