Section 80P deduction split: interest from a Regional Rural Bank denied, while interest from a Central Cooperative Bank qualified.

Interest income from a Regional Rural Bank was treated as ineligible for deduction under section 80P(2)(d) because, applying section 22 of the Regional Rural Banks Act, 1976, the later Supreme Court scope of section 80P, and the distinction created by section 80P(4), the bank was not regarded as a co-operative society for that purpose. Interest from a Central Cooperative Bank, however, remained deductible under section 80P(2)(d), and the appellate deletion on that component was sustained. The result was a split treatment of interest income depending on the character of the recipient bank.

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Issues: Whether deduction under section 80P(2)(d) of the Income-tax Act, 1961 was allowable on interest income earned from a Regional Rural Bank and a Central Cooperative Bank.

Analysis: The claim in respect of interest from the Regional Rural Bank was examined in the light of section 22 of the Regional Rural Banks Act, 1976 and the later Supreme Court ruling on the scope of section 80P, as well as the legislative distinction introduced by section 80P(4) for co-operative banks. Applying that framework, interest received from a Regional Rural Bank was held not to qualify as deductible under section 80P(2)(d), since the entity was not treated as a co-operative society for that purpose. The interest received from the Central Cooperative Bank, however, was upheld as deductible and the deletion made by the first appellate authority on that component was sustained.

Conclusion: Deduction was denied for interest from the Regional Rural Bank and allowed for interest from the Central Cooperative Bank, resulting in a partial success for the Revenue.

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