Deduction under Section 80P(2)(d) for interest from co operative banks affirmed as co operative society; appeal dismissed.

The issue concerns entitlement to deduction for interest income under Section 80P(2)(d) where the assessee is a co operative credit society earning interest from a co operative bank. The court treated a co operative bank as falling within the broad legal concept of a co operative society based on regulatory characterisation, applying that classification to allow the Section 80P(2)(d) deduction. Consequently, the revenue appeal against prior allowance of the deduction was dismissed and the interest income from the co operative society bank was held deductible under the statutory exemption.

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Issues:
1. Disallowance of deduction under Section 80P(2)(d) of the Income Tax Act.
2. Interpretation of whether a Co-operative Bank should be considered a Co-operative Society for deduction purposes.

Issue 1: Disallowance of deduction under Section 80P(2)(d) of the Income Tax Act:
The case involved a Co-operative Credit Society providing credit facilities to members and marketing agricultural produce, running various businesses, including a medical shop and lodging services. The Assessing Officer disallowed a deduction claimed under Section 80P(2)(d) of the Act, related to interest income from Co-operative Banks, treating it as income from "other sources." The Commissioner of Income Tax (Appeals) allowed the deduction, which was further challenged by the Revenue before the ITAT. The ITAT dismissed the Revenue's appeal, leading to the current challenge in the High Court.

Issue 2: Interpretation of whether a Co-operative Bank should be considered a Co-operative Society for deduction purposes:
The primary contention raised in the High Court was whether a Co-operative Bank should be considered a Co-operative Society for the purpose of claiming deductions under Section 80P(2)(d) of the Act. The Court highlighted that the issue had been previously decided by the ITAT in different cases. It was emphasized that the term "Co-operative Society" is of broad scope, encompassing various types of activities, while a Co-operative Bank is a specific type falling under this umbrella term. The Court noted that as per the Banking Regulations Act, a primary Co-operative Society bank is considered a Co-operative Society. Therefore, interest earned from a Co-operative Society Bank should be eligible for deduction under Section 80P(2)(d) of the Act.

In conclusion, the High Court dismissed the Revenue's appeal, stating that the questions of law raised were not applicable to the case at hand. The Court found that the interest earned by the assessee from a Co-operative Society Bank was indeed deductible under Section 80P(2)(d) of the Income Tax Act. The judgment reaffirmed that a Co-operative Bank falls within the definition of a Co-operative Society for the purpose of claiming deductions, as clarified by both legislative provisions and previous judicial interpretations.

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