Co-operative society interest on co-operative bank deposits qualifies for deduction under Section 80P(2)(d), with favourable interpretation applied.

Interest income earned by a co-operative society from investments with co-operative banks was held eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal followed coordinate bench decisions of the Mumbai ITAT allowing such deduction and applied the principle that, where taxing provisions admit divergent views, the interpretation favourable to the assessee should prevail. On that basis, the disallowance made in processing the return was held unsustainable, and the deduction was allowed.

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Issues: Whether interest income earned by a co-operative society from investments with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961, and whether the adjustment made in processing the return could validly deny such deduction.

Analysis: The Tribunal noted that coordinate benches of the Mumbai Tribunal had consistently allowed deduction under Section 80P(2)(d) in respect of interest income from co-operative banks. It adopted the view that where divergent judicial views exist on a taxing provision, the interpretation favouring the assessee should be followed. Relying on that approach, the Tribunal held that interest earned from investments with co-operative banks qualifies for deduction under Section 80P(2)(d).

Conclusion: The disallowance of deduction under Section 80P(2)(d) was held to be unsustainable and the deduction was allowed in favour of the assessee.

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