Deduction for co-operative society interest income from co-operative banks allowed under section 80P(2)(d), subject to verification.

Interest or dividend income earned by a co-operative society from investments with co-operative banks was treated as eligible for deduction under section 80P(2)(d) because a co-operative bank is regarded as a co-operative society for that purpose. The exclusion in section 80P(4) was read as applying to co-operative banks claiming deduction under section 80P, not to a co-operative society claiming deduction on income from deposits placed with such banks. Applying consistent Tribunal views and the construction favourable to the assessee where two interpretations are possible, the deduction was allowed subject to verification.

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Issues: Whether interest or dividend income earned by a co-operative society from investments with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: Section 80P(2)(d) grants deduction for income by way of interest or dividend derived by a co-operative society from its investments with any other co-operative society. A co-operative bank continues to be a co-operative society for this purpose, and the exclusion in section 80P(4) is directed at co-operative banks claiming deduction under section 80P, not at a co-operative society claiming deduction on income earned from deposits placed with such banks. Following consistent Tribunal decisions and the principle that where two reasonable constructions of a taxing provision are possible the one favourable to the assessee should be adopted, the interest income from co-operative banks was held to fall within the deduction provision, subject to verification.

Conclusion: The assessee is entitled to deduction under section 80P(2)(d) on interest earned from co-operative banks, subject to verification.

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