Court allows exemption for interest earned on short-term deposits as 'investment' under Income-tax Act

The court ruled in favor of the co-operative society, holding that interest earned on short-term deposits qualifies as 'investment' under section 80P(2)(d) of the Income-tax Act, 1961. Following the precedent set in a previous case, the court allowed the exemption from income tax for such investments made with another co-operative society, subject to verification by the Assessing Officer.

---

---

Issues involved: Interpretation of provisions of section 80P(2)(d) of the Income-tax Act, 1961 regarding exemption for short-term deposits as 'investment' for a co-operative society.

In the judgment delivered by N. K. AGRAWAL J., the Income-tax Appellate Tribunal referred a question regarding the exemption of interest earned on short-term deposits as 'investment' u/s 80P(2)(d) of the Act for the assessment year 1981-82. The assessee, a co-operative society, claimed exemption under clause (d) of section 80P(2) for income earned in the form of interest on certain deposits and investments. The court noted that interest or dividend derived from investment with another co-operative society is exempt from income tax. A previous case, CIT v. Haryana Co-operative Sugar Mills Ltd., established that short-term call deposits in a co-operative bank were considered 'investments' u/s 80P(2)(d) and eligible for deduction from taxable income. The court adopted the same view as the previous case, ruling in favor of the assessee-society, subject to verification by the Assessing Officer if the investments were made with another co-operative society.

---