Section 80P(2)(d) deduction on co-operative bank interest cannot be denied through section 143(1)(a) processing adjustments.

Processing adjustments under section 143(1)(a) cannot be used to disallow a section 80P(2)(d) deduction unless the claim falls within the limited categories of an apparent incorrect claim or other specified adjustment; the intimation was therefore unsustainable. Interest earned by a co-operative society from co-operative banks remained eligible for deduction under section 80P(2)(d), because a co-operative bank is treated as a co-operative society for the relevant purpose and the restriction in section 80P(4) did not apply to the assessee. The additions made in processing were set aside and the deduction claim was allowed.

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Issues: (i) Whether disallowance of deduction under section 80P(2)(d) could be made as an adjustment while processing the return under section 143(1)(a) of the Income-tax Act, 1961; (ii) Whether interest income received from co-operative banks qualified for deduction under section 80P(2)(d) as income derived from investments with another co-operative society.

Issue (i): Whether disallowance of deduction under section 80P(2)(d) could be made as an adjustment while processing the return under section 143(1)(a) of the Income-tax Act, 1961.

Analysis: The adjustment power under section 143(1)(a) is confined to the specified categories, including an incorrect claim apparent from the return. Disallowance of Chapter VI-A deductions on the ground of late filing is separately contemplated in section 143(1)(a)(v), and the claim here was not one exceeding a statutory limit or otherwise falling within the defined category of an incorrect claim. The disallowance therefore did not fit within the permissible scope of processing adjustments.

Conclusion: The disallowance under section 143(1)(a) was not permissible and the intimation was unsustainable.

Issue (ii): Whether interest income received from co-operative banks qualified for deduction under section 80P(2)(d) as income derived from investments with another co-operative society.

Analysis: A co-operative bank is treated as a co-operative society for the purposes of the relevant state co-operative law, and section 80P(2)(d) allows deduction of interest income derived by a co-operative society from investments with any other co-operative society. The assessee was not a co-operative bank, so the restriction in section 80P(4) did not apply to it. On that basis, interest earned from co-operative banks remained eligible for deduction under section 80P(2)(d).

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on interest received from co-operative banks.

Final Conclusion: The additions made in processing were set aside and the assessee's deduction claim was directed to be allowed for all the years in appeal.

Ratio Decidendi: A deduction claim under section 80P(2)(d) cannot be disallowed as an adjustment under section 143(1)(a) unless it falls within the specific processing adjustments permitted by that provision, and interest from a co-operative bank is eligible for deduction when the recipient is a co-operative society not hit by section 80P(4).

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