Deduction under section 80P(2)(a)(i): income from member credit, including provisions charged to P&L, qualifies for relief.

Eligibility for deduction under section 80P(2)(a)(i) turns on the character of income, not the society's name; where byelaws establish that a cooperative carries on lending to members, income from providing credit facilities qualifies for the deduction. The principle was applied to include amounts representing provisions debited to the profit and loss account as part of such income, and additions made by the assessing officer that denied the deduction were deleted, resulting in allowance of the deduction on the income determined in assessment.

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Issues: Whether the assessee, a cooperative society, is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 in respect of income arising from providing credit facilities to members, including deduction on provisions debited to profit and loss account; and consequential deletion of additions made by the Assessing Officer.

Analysis: The Tribunal examined the society's registration documents and byelaws placed on record and noted that clause 11 of the byelaws expressly provides that the society's objects include granting loans and advances to members. The authorities below denied deduction under section 80P(2)(a)(i) primarily by referring to the society's name and certain land acquisition objects without a complete reading of the byelaws. The Tribunal held that eligibility for deduction under section 80P(2)(a)(i) depends on the nature of the income earned (i.e., income arising from providing credit facilities to members) rather than the society's name. Once it is established from the byelaws that the society carries on activities of providing credit facilities, income arising from such activities, including profits enhanced by disallowance of provisions, falls within the ambit of deduction under section 80P(2)(a)(i). The Tribunal therefore directed that deduction under section 80P(2)(a)(i) be allowed on the income determined in assessment and specifically on the amount of provisions debited in the profit and loss account, and deleted the additions made by the Assessing Officer by denying the deduction.

Conclusion: The assessee is entitled to deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 in respect of income from providing credit facilities to members, including the amounts representing provisions debited to profit and loss account; the additions made by the Assessing Officer by denying the deduction stand deleted and the appeal is allowed in favour of the assessee.

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