Co-operative Society- Special deduction u/s. 80P- A. Y. 2010-11- Multi-purpose co-operative credit society registered under the Karnataka Act- Sub-section (4) of section 80P is not applicable- Society entitled to special deduction-

The assessee is a multi-purpose co-operative credit society. For the A. Y. 2010-11 the assessee claimed the entire amount as deduction u/s. 80P(2)(a)(i) of the Income-tax Act, 1961. The Assessing Officer declined deduction on the ground that the assessee was a primary co-operative bank disentitled to the benefit of deduction u/s. 80P(2)(a)(i), in the light of section 80P(4). This was confirmed by the Tribunal.

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

“i) Section 80P(4) of the Act disentitles any “co-operative bank” other than a “primary agricultural credit society” or “primary co-operative agricultural and rural development bank” to benefits of deduction u/s. 80P. The explanation to sub-section (4) states that “co-operative bank” and “primary agricultural credit society” shall have the meanings respectively assigned to them in part V of the Banking Regulation Act, 1949.

ii) The assessee was a multi-purpose co-operative credit society registered under the Karnataka Co-operative Societies Act, 1959 and it fell within the definition of multipurpose co-operative society u/s. 2(f)(1) of the 1959 Act, and also under the definition of the term primary agricultural credit co-operative society”. Regard being had to section 5(cciv) as provided u/s. 56 of the Banking Regulation Act, 1949, the assessee being a primary agricultural credit co-operative society, coupled with the fact that under its bye-laws, a co-operative society can not become a member, complied with the requirement of the Act.

iii) In that view of the matter, the exception carved out in subsection (4) of section 80P of the Act squarely applies to the assessee. Hence, the assessee was entitled to the deduction u/s. 80P(2)(a)(i).”