Interest from Cooperative Bank Deposits Eligible for Tax Deduction

The Tribunal allowed the appeal, determining that the interest earned by the appellant from deposits with a Cooperative Bank, registered as a Co-operative Society, was eligible for deduction under Section 80P(2)(d) of the Income-tax Act. The Tribunal held that the CIT's order was incorrect, and the appellant's claim for deduction was upheld.

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Issues:
1. Whether deduction under section 80P(2)(d) of the Income-tax Act should be allowed on interest received from deposits with Cooperative Banks.
2. Whether a Cooperative bank can be considered a Cooperative Society for the purpose of claiming deductions under section 80P(2)(d).
3. Whether the order of the CIT under section 263 of the Act was erroneous and prejudicial to the interest of revenue.

Issue 1: Deduction under section 80P(2)(d)
The appellant claimed a deduction under section 80P(2)(d) of the Income-tax Act on interest received from deposits with Cooperative Banks. The CIT held that this claim should not have been accepted, stating that a Cooperative bank cannot be considered a Cooperative Society for the purpose of this deduction. The appellant argued that the bank where it had placed its deposits was registered as a Co-operative Society under the Co-operative Societies Act, but the CIT disagreed. The question was whether interest on deposits earned by a Co-operative Society with a Cooperative Bank is allowable as a deduction under Section 80P(2)(d).

Issue 2: Cooperative bank as a Cooperative Society
The Tribunal considered previous judgments, including one where it was held that a Cooperative bank, being a Co-operative Society, cannot be excluded from the benefits available to a Cooperative Society unless the Act stipulates otherwise. The Tribunal found that the provisions of Section 80P(2)(d) did not warrant the restrictive interpretation given by the CIT. It was concluded that the income by way of interest or dividends earned by the appellant from the Cooperative bank, which was also a Co-operative Society, was eligible for deduction under Section 80P(2)(d).

Issue 3: Error in CIT's order
The appellant challenged the order of the CIT under section 263 of the Act, arguing that it was erroneous and prejudicial to the interest of revenue. The Tribunal disagreed with the CIT's interpretation and held that the order of the Assessing Officer was not erroneous. It was concluded that the deduction claimed by the appellant was allowable, and the order of the CIT was canceled. Consequently, the appeal of the assessee was allowed for Assessment Year 2009-10.

In conclusion, the Tribunal allowed the appeal, holding that the interest earned by the appellant from deposits with a Cooperative Bank, registered as a Co-operative Society, was eligible for deduction under Section 80P(2)(d) of the Income-tax Act. The Tribunal found that the CIT's order was not correct, and the appellant's claim for deduction was justified.

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