Interest from co-operative bank deposits qualifies for section 80P(2)(d) deduction when the bank is treated as a co-operative society.

Interest earned by a co-operative housing society from fixed deposits with co-operative banks was treated as eligible for deduction under section 80P(2)(d) because the co-operative banks were regarded as co-operative societies under the governing co-operative law. The analysis noted that the statutory definition of society included a co-operative society, and the assessee was not a co-operative bank, so section 80P(4) did not apply to bar the claim. On that basis, the interest income retained the character required for deduction, and the disallowance was held unsustainable.

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Issues: Whether interest earned by a co-operative housing society from fixed deposits placed with co-operative banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961, on the footing that such co-operative banks are co-operative societies.

Analysis: The assessee had earned interest income from fixed deposits with co-operative banks and claimed deduction under section 80P(2)(d). The dispute turned on whether the recipient banks could be treated as co-operative societies for the purpose of that provision. The relevant co-operative law treated a co-operative bank as a society carrying on banking business, and the statutory definition of society included a co-operative society. The assessee was not a co-operative bank and was not hit by section 80P(4). On that footing, the character of the deposit-taking institutions remained that of co-operative societies notwithstanding their banking activity.

Conclusion: Deduction under section 80P(2)(d) was allowable to the assessee in respect of interest received from co-operative banks, and the disallowance was unsustainable.

Ratio Decidendi: For the purpose of section 80P(2)(d), interest earned by a co-operative society from deposits with a co-operative bank is eligible for deduction where the co-operative bank is itself treated as a co-operative society under the governing co-operative law.

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