Cooperative society wins deduction for interest income from deposits with banks

The Tribunal allowed the appeal of the cooperative society, ruling in favor of granting the deduction u/s.80P(2)(d) of the Income-tax Act for the interest earned on deposits with cooperative banks. The decision emphasized that interest income from such deposits was attributable to the business of providing credit facilities, making the society eligible for the deduction. This clarified the eligibility of the society for claiming deductions under specific sections of the Act based on the nature of income and its connection to the society's business activities.

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Issues: Whether interest received by a co-operative society on deposits placed with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The expression "investments with any other co-operative society" in section 80P(2)(d) was held to be wide enough to include deposits placed with co-operative banks, since such banks are also co-operative societies unless the statute expressly excludes them. The reasoning rejected a narrow distinction between investments and deposits. The decision in Totgars was treated as confined to its facts, where the amount represented a liability payable to members and not surplus funds invested by the society. The interest in the present case arose from surplus funds temporarily parked and was therefore treated as income eligible for deduction.

Conclusion: Deduction under section 80P(2)(d) was allowed to the assessee on interest earned from deposits with co-operative banks.

Ratio Decidendi: Interest earned by a co-operative society from deposits made with a co-operative bank qualifies as income from investments with another co-operative society for the purpose of section 80P(2)(d), and a co-operative bank is not excluded from that expression absent an express statutory bar.

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