Co-operative society – Deduction u/s. 80P(2)(a) (i) – A. Ys. 2008-09, 2009-10 and 2011-12 – Byelaws of society not prohibiting other co-operative societies from being its members – Assessee is not a co-operative bank – Assessee entitled to deduction u/s. 80P(2)(a)(i)

For the A. Ys. 2008-09, 2009-10 and 2011-12, the Assessing Officer disallowed the assessee’s claim for deduction u/s. 80P(2)(a)(i), on the ground that the assessee was a primary co-operative bank. The Tribunal upheld the decision.

On appeal by the assessee, the Bombay High Court reversed the decision of the Tribunal and held as under:

“i) There was no dispute between the parties that the assessee was a co-operative society as the society was registered under the Goa Co-operative Societies Act, 2001. Its transactions with non-members were insignificant or miniscule. On the above basis, it could not be concluded that the assessee’s principal business was of accepting deposits from the public and, therefore, it was in banking business. Besides, the qualifying condition 3 for being considered as a primary co-operative bank is that the bye-laws must not permit admission of any other co-operative society. This is a mandatory condition, i.e., the bye-laws must specifically prohibit the admission of any other cooperative society to its membership. The Revenue had not been able to show any such prohibition in the bye-laws of the assessee.

ii) The assessee could not be considered to be a cooperative bank for the purposes of section 80P(4) of the Act. Thus, the assessee was entitled to the benefit of deduction u/s. 80P(2)(a)(i) of the Act.

iii) The authorities should restrict the benefit of deduction u/s. 80P of the Act only to the extent that the income is earned by the assessee in carrying on its business of providing credit facilities to its members.”