Deduction for interest from co-operative bank deposits under section 80P(2)(d) applies where the bank is treated as a co-operative society.

Interest earned by a co-operative society from deposits placed with a co-operative bank is deductible under section 80P(2)(d) because, for that provision, a co-operative bank falls within the expression "co-operative society". The analysis also distinguishes an earlier Supreme Court ruling on section 80P(2)(a)(i), holding that it concerned business income and did not control the present deduction question under section 80P(2)(d). On that basis, the deduction was treated as rightly available and the Revenue's challenge failed.

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Issues: Whether interest earned by a co-operative society from deposits placed with a co-operative bank is deductible under section 80P(2)(d) of the Income-tax Act, 1961, and whether the decision dealing with section 80P(2)(a)(i) governs the controversy.

Analysis: The relevant question was confined to section 80P(2)(d), which grants deduction in respect of interest or dividend derived by a co-operative society from its investments with any other co-operative society. A co-operative bank was treated as falling within the expression co-operative society, both on the breadth of the statutory expression and by reason of the definition in section 56(i)(ccv) of the Banking Regulation Act, 1949. On that footing, interest earned from a co-operative bank qualified for deduction. The earlier Supreme Court ruling relied upon by the Revenue concerned section 80P(2)(a)(i) and the character of business income, and therefore did not control the present issue.

Conclusion: The deduction under section 80P(2)(d) was rightly allowed and the Revenue's challenge failed.

Final Conclusion: The addition made by the Assessing Officer was unsustainable, and the assessee succeeded in retaining the deduction on interest income from the co-operative bank.

Ratio Decidendi: Interest derived by a co-operative society from deposits with a co-operative bank is deductible under section 80P(2)(d) because a co-operative bank falls within the expression co-operative society for that purpose, and a precedent construing a different clause does not govern that deduction.

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