Statutory deeming provision governs Regional Rural Bank interest, preserving section 80P deduction for co-operative societies.

A co-operative society was entitled to deduction under section 80P(2)(d) on interest earned from deposits with a Regional Rural Bank. Section 22 of the Regional Rural Banks Act, 1976 deems a Regional Rural Bank to be a co-operative society for Income-tax Act purposes, so the statutory deeming provision prevailed over a contrary CBDT circular withdrawing earlier beneficial treatment. As the interest was received from an entity treated as a co-operative society in law, the deduction remained allowable and the Revenue's challenge failed.

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Issues: Whether the assessee co-operative society was entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest earned from deposits with a Regional Rural Bank.

Analysis: The issue was covered by the jurisdictional High Court and the co-ordinate Bench in the assessee's own case. Section 22 of the Regional Rural Banks Act, 1976 deems a Regional Rural Bank to be a co-operative society for the purposes of the Income-tax Act, 1961. The CBDT circular withdrawing the earlier beneficial treatment for Regional Rural Banks could not override the statutory deeming provision. Since the assessee was a co-operative society earning interest from an entity deemed to be a co-operative society for income-tax purposes, the deduction under section 80P(2)(d) was allowable.

Conclusion: The assessee was entitled to the deduction under section 80P(2)(d), and the Revenue's challenge failed.

Ratio Decidendi: A statutory deeming provision under section 22 of the Regional Rural Banks Act, 1976 prevails over a contrary CBDT circular, and interest received by a co-operative society from a Regional Rural Bank qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

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