Co-operative society deduction for interest income upheld under section 80P(2)(d), including deposits with co-operative banks.

A co-operative society may claim deduction under section 80P(2)(d) on interest income from investments with another co-operative society, and the same reasoning was applied to interest from deposits with a co-operative bank. Section 80P(4) does not defeat such a claim because it excludes deduction for co-operative banks as assessees, not for a co-operative society receiving interest income. The Supreme Court ruling on section 80P(2)(a)(i) was treated as inapplicable, since that provision concerns surplus funds and not deduction under section 80P(2)(d).

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Issues: Whether the assessee, being a co-operative society, was entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest income earned from investments made with another co-operative society or with a co-operative bank.

Analysis: The provision allows deduction of interest or dividend income derived by a co-operative society from its investments with any other co-operative society. The disallowance based on section 80P(4) was held not to defeat a claim under section 80P(2)(d), because that sub-section only excludes deduction in relation to co-operative banks as assessees and does not deny deduction to a co-operative society that earns interest from such deposits. The reliance placed on the Supreme Court decision dealing with section 80P(2)(a)(i) was found inapplicable, as the issue there was surplus funds and not deduction under section 80P(2)(d). The view supporting eligibility was also reinforced by the interpretation that a co-operative bank falls within the broader expression co-operative society for this purpose.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the interest income earned from investments with co-operative societies and co-operative banks.

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