Deduction on full interest from co-operative bank allowed u/s 80P(2)(d) without netting off payments

HC upheld the ITAT's decision allowing deduction under s. 80P(2)(d) to the assessee-co-operative society on the full amount of interest received from a co-operative bank, without setting off interest paid to that bank. The Court held that s. 80P(2)(d) grants deduction on "any income by way of interest or dividends" derived from investments with any other co-operative society, without distinction as to the source of funds or requirement of netting/adjustment. The Act contains no mandate to reduce the interest income by interest paid. The reference was answered in favour of the assessee and against the Revenue.

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Issues involved: Interpretation of deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Summary:
The High Court of Punjab and Haryana addressed the issue of whether deduction under section 80P(2)(d) of the Income-tax Act, 1961 should be allowed in a case where interest received from a cooperative bank exceeded the interest paid to the bank. The case involved Doaba Co-operative Sugar Mills Ltd., which had claimed this deduction but faced disallowance during assessment. The Income-tax Appellate Tribunal later allowed the deduction, leading to a reference to the High Court for opinion.

Upon hearing arguments, the court considered the provisions of section 80P(2)(d) which allow deduction for income by way of interest derived by a cooperative society from its investments with another cooperative society. The court emphasized the principle that in a taxing statute, one must strictly adhere to the language used without implying additional conditions. It was noted that the Act does not require adjustment of interest paid to a cooperative bank against interest received from it for the purpose of claiming the deduction under section 80P(2)(d).

The court concluded that the Tribunal was correct in allowing the deduction under section 80P(2)(d) for the interest received from Nawanshahr Central Co-operative Bank, without considering the interest paid to the bank. Therefore, the reference was answered in favor of the assessee, affirming the decision of the Tribunal and rejecting the Revenue's argument against the deduction.

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