Broad meaning of investment under tax deduction rules allows interest on short-term call deposits with co-operative societies.

Section 80P(2)(d) was construed broadly, with "investment" given its popular meaning rather than a narrow technical one. Short-term call deposits placed by one co-operative society with another co-operative bank for earning interest were treated as investments, even though they were withdrawable on different terms before maturity. Read in light of the object of the provision, the interest derived from such deposits qualified for deduction because it represented income from investment with another co-operative society. The co-operative law framework and the deposit approval mechanism supported that characterisation, and the deduction was held available to the assessee.

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Issues: Whether short-term call deposits made by a co-operative society out of surplus funds in another co-operative bank constituted an investment within section 80P(2)(d) of the Income-tax Act, 1961, so as to entitle the assessee to deduction of the interest earned therefrom.

Analysis: The term "investment" in section 80P(2)(d) was treated as bearing its popular, and not a narrow technical, meaning. A short-term call deposit was found to be akin to a fixed deposit placed for earning interest, even though it could be withdrawn before maturity on different terms. The provision was read in the context of its object, namely, to exclude from taxable income the interest or dividend earned by one co-operative society from investment with another co-operative society. The co-operative law framework and the approval mechanism for such deposits also supported the characterisation of the deposits as investments.

Conclusion: The short-term call deposits were investments within the meaning of section 80P(2)(d), and the interest derived from them qualified for deduction. The answer was in favour of the assessee.

Ratio Decidendi: For the purpose of section 80P(2)(d), "investment" is to be understood in its popular sense, and a short-term call deposit placed by one co-operative society with another for earning interest constitutes an investment eligible for deduction.

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