Co-operative society deduction on interest from co-operative bank deposits remains available despite section 80P(4) exclusion.

Section 80P(4) excludes co-operative banks from the general deduction regime, but it does not override the specific deduction under section 80P(2)(d) for a co-operative society's interest income from investments with another co-operative society, including a co-operative bank. A co-operative credit society is not treated as a co-operative bank merely because it places deposits with co-operative banks, especially where it is not shown to carry on banking business with non-members or to hold a banking licence. The Tribunal held that the exclusion in section 80P(4) did not apply and the interest income remained deductible under section 80P(2)(d).

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Issues: Whether a co-operative credit society is to be treated as a co-operative bank for the purposes of section 80P(4), and whether interest earned on investments placed with co-operative banks is deductible under section 80P(2)(d).

Analysis: The assessee was registered as a co-operative credit society and not shown to carry on banking business with non-members or to hold a banking licence. On the statutory scheme, section 80P(4) withdraws the benefit of section 80P from co-operative banks, but section 80P(2)(d) separately allows deduction of interest or dividend income derived by a co-operative society from investments with any other co-operative society. A co-operative bank continues to be a co-operative society for this limited purpose. The Tribunal followed the view that the exclusion in section 80P(4) does not take away deduction under section 80P(2)(d) for interest earned by a co-operative society from deposits with a co-operative bank.

Conclusion: The assessee was not a co-operative bank for the purpose of denial under section 80P(4), and the interest income from investments with co-operative banks was deductible under section 80P(2)(d).

Final Conclusion: The disallowance was deleted and the assessee's claim for deduction on the relevant interest income was allowed.

Ratio Decidendi: Section 80P(4) excludes co-operative banks from the general benefit of section 80P, but it does not override the specific deduction available under section 80P(2)(d) to a co-operative society in respect of interest derived from investments with another co-operative society, including a co-operative bank.

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