Co-operative society interest deduction applies to deposits with co-operative banks under section 80P(2)(d).

Interest earned by a co-operative society from deposits placed with co-operative banks qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961, because such banks are treated as co-operative societies for that provision. The contrary view in the assessment and appellate order was set aside, and the disallowances were deleted. The ruling confirms that income by way of interest derived from investments with co-operative banks falls within the deduction available to a co-operative society under section 80P(2)(d).

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Issues: Whether interest earned by a co-operative society from deposits placed with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The interest income arose from investments made with co-operative banks. Section 80P(2)(d) allows deduction in respect of income by way of interest or dividend derived by a co-operative society from its investments with any other co-operative society. Following the consistent view that a co-operative bank is a co-operative society for this purpose, the interest earned from such deposits was held to qualify for deduction. The contrary view taken in the assessment and appellate order was set aside.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the interest earned from deposits with co-operative banks, and the disallowances were deleted.

Ratio Decidendi: Interest earned by a co-operative society from deposits with a co-operative bank qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961, because such a bank is treated as a co-operative society for the purpose of that provision.

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