Co-operative society interest from co-operative banks qualifies for deduction under section 80P(2)(d), subject to proper bifurcation.

Interest earned by a co-operative society from deposits with co-operative banks was treated as eligible for deduction under section 80P(2)(d) because a co-operative bank remains a co-operative society for section 2(19), and section 80P(4) only restricts the bank's own claim, not the recipient society's deduction. The benefit was therefore available in principle, but the assessee had to furnish bifurcation of the interest income before the Assessing Officer so the allowable deduction could be properly quantified.

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Issues: Whether interest income earned by a co-operative society from deposits made with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961, and whether the assessee was required to furnish bifurcation of such interest income for grant of relief.

Analysis: Section 80P(2)(d) allows deduction of income by way of interest or dividend derived by a co-operative society from its investments with any other co-operative society. The provision is not confined to interest from co-operative societies in a narrow sense that excludes co-operative banks, since a co-operative bank continues to be a co-operative society for the purposes of section 2(19) of the Income-tax Act, 1961. The restriction in section 80P(4) operates against a co-operative bank claiming deduction for its own banking income, but it does not automatically deny a recipient co-operative society's claim under section 80P(2)(d) on interest earned from investment with such bank. Following the settled approach favouring the assessee in case of competing constructions of a taxing provision, the interest derived from co-operative banks was held to be eligible, though the assessee was required to place bifurcation of the interest income before the Assessing Officer for quantification of the allowable claim.

Conclusion: The deduction under section 80P(2)(d) was held allowable in principle for interest earned from co-operative banks, and the assessee was directed to furnish bifurcation for grant of the deduction to the extent eligible.

Final Conclusion: The appeals succeeded on the substantive entitlement to deduction, with relief confined to interest income attributable to co-operative banks and subject to working out the correct amount before the Assessing Officer.

Ratio Decidendi: For purposes of section 80P(2)(d), a co-operative bank is not excluded from the expression "any other co-operative society" merely because section 80P(4) denies deduction to the co-operative bank itself; therefore, a co-operative society's interest income from investments with a co-operative bank remains deductible, subject to proper quantification.

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