Section 80P deduction applies to interest on statutory reserve fund deposits, but not to savings account interest.

Interest earned on fixed deposits made from a statutory reserve fund, and invested in approved banking institutions in compliance with co-operative society obligations, was treated as attributable to the society's business and eligible for deduction under section 80P(2)(a)(i). The Tribunal distinguished such reserve fund investments from mere deployment of surplus funds and followed its earlier view in the assessee's own case. By contrast, interest on savings account deposits with the same bank was held to stand on a different footing and was not eligible for the deduction.

---

---

Issues: Whether interest income earned on fixed deposits placed with Bank of Maharashtra out of reserve funds was eligible for deduction under section 80P(2)(a)(i), and whether interest on savings account deposits with the same bank was also eligible.

Analysis: The assessee society was required under the Maharashtra Co-operative Societies Act to transfer a part of its profits to reserve fund and was permitted to invest that fund in approved banking institutions. The Tribunal followed its earlier decision in the assessee's own case and distinguished cases involving mere surplus funds, holding that the fixed deposits represented statutory reserve fund investments made in the course of the assessee's business activity. The Tribunal also held that savings account interest stood on a different footing and did not qualify for the deduction.

Conclusion: Deduction under section 80P(2)(a)(i) was allowable on interest from fixed deposits with Bank of Maharashtra, but not on interest from the savings account.

Ratio Decidendi: Interest earned on statutory reserve fund investments made in compliance with co-operative society obligations and integral to the carrying on of the business is attributable to the business for the purposes of section 80P(2)(a)(i), whereas savings account interest is not so eligible.

---