Cooperative society interest on fixed deposits treated as business income and allowed deduction under section 80P(2)(a)(i).

Interest earned by a cooperative society on fixed deposits placed with cooperative banks and scheduled banks was treated as attributable to its business activities and, on that basis, qualified for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. The ITAT Pune noted conflicting High Court views but followed the view favourable to the assessee and the coordinate bench decision relied upon. The issue was decided in favour of the cooperative society, with the interest income held deductible under the provision.

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Issues: Whether interest income earned by a cooperative society from fixed deposits placed with cooperative banks and scheduled banks is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The Tribunal noted the existence of conflicting High Court views on whether such interest income can be treated as attributable to the activities of the society. Following the view favourable to the assessee and the coordinate bench decision relied upon, the Tribunal treated the interest earned on fixed deposits with cooperative banks and scheduled banks as partaking the character of business income attributable to the society's activities.

Conclusion: The interest income was held to be eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, and the issue was decided in favour of the assessee.

Ratio Decidendi: Interest income earned by a cooperative society on fixed deposits with cooperative banks and scheduled banks, where treated as attributable to the society's business activities, qualifies for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

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