Co-operative society interest deduction upheld for investment income from co-operative banks; section 80P(4) did not bar the claim.

Interest income earned by a co-operative housing society from deposits or investments with co-operative banks was held deductible under section 80P(2)(d) because the provision applies where a co-operative society receives interest or dividend from investments made with another co-operative society. The term "co-operative society" in section 2(19) was treated as broad enough to include a society registered under the relevant State co-operative law. Section 80P(4) was held to target co-operative banks claiming deduction under section 80P, and not to bar a co-operative housing society's claim on interest income. The disallowance on the basis that the recipient entities were multi-state scheduled banks was therefore unsustainable.

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Issues: Whether interest income earned by a co-operative housing society from deposits/investments made with co-operative banks qualified for deduction under section 80P(2)(d) of the Income-tax Act, 1961, and whether section 80P(4) barred such claim.

Analysis: The condition under section 80P(2)(d) is satisfied when a co-operative society earns income by way of interest or dividends from investments made with another co-operative society. The expression "co-operative society" in section 2(19) is wide enough to include a society registered under the applicable State co-operative law. The restriction in section 80P(4) is directed at co-operative banks seeking deduction under section 80P and is not intended to deny deduction to a co-operative housing society earning interest from its investments. The denial of deduction on the footing that the recipient banks were multi-state scheduled banks was therefore unsustainable.

Conclusion: Deduction under section 80P(2)(d) was allowable on the interest income, and the disallowance was not justified.

Ratio Decidendi: Interest earned by a co-operative society from investments with another co-operative society is deductible under section 80P(2)(d), and section 80P(4) does not defeat that claim when the assessee is not itself a co-operative bank.

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