Co-operative society interest income can qualify for deduction when invested with another co-operative society, despite section 80P restrictions.

A co-operative housing society's interest income from investments with another co-operative society was treated as eligible for deduction, because section 80P(2)(d) extends to income by way of interest or dividends derived from such investments. The earlier reliance on section 80P(2)(a)(i) and surplus-fund cases was held inapplicable, and the restriction in section 80P(4) was not applied to deny the deduction on these facts. A co-operative bank was regarded as falling within the expression co-operative society for this purpose, so the disallowance was deleted.

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Issues: Whether a co-operative housing society is entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest income earned from investments with another co-operative society or co-operative bank, despite the restriction in section 80P(4).

Analysis: The relevant statutory language allows deduction of income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society. The decision relied on by the lower authorities dealt with section 80P(2)(a)(i) and interest on surplus funds, and was held inapplicable. Following coordinate bench decisions and the view that a co-operative bank falls within the expression co-operative society for the purpose of section 80P(2)(d), the interest earned by the assessee from such investments remained eligible for deduction.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the interest income, and the disallowance was deleted.

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