Deduction for interest on statutory reserve deposits depends on cooperative business nexus and fresh factual examination.

Interest earned by cooperative societies on fixed deposits maintained to satisfy statutory reserve requirements may fall within deduction under section 80P(2) where the income is attributable to the society's cooperative business and the investment is a condition of carrying on that activity. The analysis emphasises the wider scope of "attributable to" over "derived from" and notes prior authority supporting deduction for statutory investments. Because the record lacked adequate findings on the interest linked to statutory reserves and did not fully examine the bye-laws and additional materials, the matter was remitted for fresh adjudication in accordance with law after considering the relevant documents and legal position.

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Issues: Whether interest earned by cooperative societies on fixed deposits kept with banks in compliance with statutory reserve requirements was eligible for deduction under section 80P(2), and whether the matter required remand for fresh factual adjudication.

Analysis: The assessees claimed that the deposits were made under the statutory framework governing cooperative societies and that the resulting interest was attributable to their business activities. Reliance was placed on the principle that income "attributable to" business is wider than income "derived from" business, and on prior authority recognising interest on statutory investments as eligible for deduction where the investment was a condition of carrying on the cooperative activity. The record, however, did not contain adequate findings on the quantum of interest linked to statutory reserves or a full examination of the bye-laws and additional materials filed before the Supreme Court.

Conclusion: The issue was remitted to the Assessing Officer for fresh adjudication in accordance with law, after considering the additional documents and the applicable legal position.

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