Deduction for interest from co-operative bank deposits applies under the specific provision, not the general business-deduction clause.

Interest earned by a co-operative credit society from deposits placed with a district co-operative bank was treated as deductible under section 80P(2)(d), because the income fell within the specific allowance for interest from co-operative institutions. The Tribunal followed the jurisdictional High Court and a co-ordinate bench, holding that the claim was not to be tested under section 80P(2)(a)(i) where the specific provision applied. On that basis, the assessee's deduction claim was accepted and the corresponding tax addition did not survive.

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Issues: Whether interest income earned by a co-operative credit society from deposits with a district co-operative bank was eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, or was deductible under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The Tribunal noted that the jurisdictional High Court had already explained that interest earned in such circumstances is not to be tested under section 80P(2)(a)(i) when the income falls within the specific allowance for interest from co-operative institutions. The Tribunal also followed its own co-ordinate bench decision applying the same legal position. On that basis, the assessee's claim was accepted in line with the binding precedent.

Conclusion: The interest income was held eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961, and the claim under section 80P(2)(a)(i) was not accepted as the governing provision.

Final Conclusion: The assessee succeeded and the tax addition arising from denial of deduction on the interest income did not survive.

Ratio Decidendi: Interest income earned by a co-operative society from deposits with a co-operative bank is deductible under the specific provision governing interest from co-operative institutions, and the claim is not to be tested under the general business-deduction provision where the factual matrix attracts the specific allowance.

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