Section 80P deduction covers interest from co-operative bank deposits, and such income is not taxable as other sources.

Interest earned by a co-operative society from deposits with a district central co-operative bank is deductible under section 80P(2)(d) because a district central co-operative bank is also a co-operative society for that purpose. The Tribunal applied the settled liberal construction of section 80P in favour of co-operative societies and followed precedent holding that such deposit interest remains eligible for deduction. It further noted that section 80P(4) excludes only co-operative banks engaged in banking business, not a primary agricultural credit society dealing with its members under the State co-operative law. The amount could not be taxed as income from other sources merely by that characterization.

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Issues: Whether interest earned by a co-operative society from deposits made with a district central co-operative bank is deductible under section 80P(2)(d) of the Income-tax Act, 1961, and whether such income can be taxed as income from other sources.

Analysis: The assessee was a primary agricultural credit society and the disputed receipt was interest from a district central co-operative bank, which was treated by the lower authorities as income from other sources. The Tribunal applied the settled principle that section 80P is a benevolent provision and must be construed liberally in favour of co-operative societies. It followed binding and coordinate-bench precedent holding that a district central co-operative bank is also a co-operative society and that interest earned from deposits with such an is eligible for deduction. The Tribunal also noted that section 80P(4) excludes only co-operative banks engaged in banking business, and not a primary agricultural credit society carrying on transactions with its members and associate members under the State co-operative law. In this setting, the interest could not be denied deduction merely by characterising it as income from other sources.

Conclusion: The interest income was held deductible under section 80P(2)(d), and the addition made by the Assessing Officer was directed to be deleted.

Ratio Decidendi: Interest earned by a co-operative society from deposits with another co-operative society or co-operative bank is deductible under section 80P(2)(d), and section 80P(4) applies only to co-operative banks engaged in banking business.

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