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Issues: Whether interest earned on fixed deposits with co-operative banks was eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, and whether the claim under section 80P(2)(d) required verification as to the character of the payer bank.
Analysis: The assessee, a co-operative credit society, claimed that the investments were made in compliance with statutory reserve and liquidity requirements under the Maharashtra Co-operative Societies Act, 1960 and that the resulting interest was attributable to its credit business. The deduction under section 80P(2)(a)(i) was declined by applying the principle that interest from bank deposits is not automatically attributable to the business of providing credit facilities. At the same time, the entitlement under section 80P(2)(d) depended on whether the interest was received from a co-operative society or from a co-operative bank carrying on banking business. Since the record did not clearly establish the precise status of the payer bank for the purpose of section 80P(2)(d), verification by the Assessing Officer was considered necessary.
Conclusion: The claim under section 80P(2)(a)(i) was not accepted on the facts, while the claim under section 80P(2)(d) was remitted to the Assessing Officer for verification. The issue was thus partly decided against the assessee and partly in its favour.
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