Section 80P(2)(d) deduction can cover interest from co-operative bank deposits, but not interest from private banks.
Interest derived by a co-operative society from deposits with another co-operative society, including a co-operative bank, may qualify for deduction under section 80P(2)(d), provided the recipient answers that statutory description and the deduction is computed on net interest after attributable expenses. The wider restriction in section 80P(4) does not, on this analysis, take away the benefit otherwise available under section 80P(2)(d), and mutuality is not treated as a controlling limitation for that clause. Interest from a private bank does not qualify under section 80P(2)(d) because the recipient is not another co-operative society, and it is also not allowable on the facts under section 80P(2)(a)(i).
Issues: (i) Whether interest income earned by a co-operative society from deposits made with a co-operative bank is eligible for deduction under section 80P(2)(d); (ii) Whether interest income earned from a private bank is eligible for deduction under section 80P or section 80P(2)(d), and whether deduction is to be confined to net interest after related s.
Issue (i): Whether interest income earned by a co-operative society from deposits made with a co-operative bank is eligible for deduction under section 80P(2)(d).
Analysis: Section 80P(2)(d) allows deduction of the whole of the income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society. The provision is distinct from section 80P(2)(a), and the wider restriction in section 80P(4) does not deprive an investing co-operative society of the deduction otherwise available under section 80P(2)(d). The expression "co-operative society" remains material, and a co-operative bank may answer that description for this purpose. The principle of mutuality is not a controlling limitation for this clause.
Conclusion: The interest income from investment with a co-operative bank is deductible under section 80P(2)(d), subject to verification that the recipient bank is a co-operative society within the statutory meaning, and subject to allowance of deduction on net interest after attributable expenses.
Issue (ii): Whether interest income earned from a private bank is eligible for deduction under section 80P or section 80P(2)(d), and whether deduction is to be confined to net interest after related expenses.
Analysis: Interest from a private bank does not fall within section 80P(2)(d) because the recipient is not another co-operative society. It also does not qualify under section 80P(2)(a)(i) on the facts. The alternative claim for pro rata expenditure became unnecessary once the main claim on co-operative bank deposits was accepted, but the allowable deduction under section 80P(2)(d) is in any event confined to resultant net income after incidental expenses.
Conclusion: The interest income from the private bank is not deductible under section 80P.
Final Conclusion: The appeals were allowed in part by granting deduction on interest earned from deposits with co-operative banks, subject to factual verification and computation on net income basis, while denying deduction on interest from the private bank.
Ratio Decidendi: For section 80P(2)(d), the decisive inquiry is whether the interest is derived by a co-operative society from investment with another co-operative society; section 80P(4) does not nullify that benefit for the investing society, and the deduction applies only to net resultant income.
TaxTMI 
AI Drafter ✕
TaxTMI 
