Section 80P deduction for interest on deposits with co-operative banks applies to a co-operative housing society under the stated tax analysis.

A co-operative housing society is entitled to deduction under section 80P(2)(d) on interest income earned from fixed deposits and savings accounts placed with co-operative banks, because the provision allows full deduction for interest or dividend derived by a co-operative society from investments with another co-operative society. The exclusion in section 80P(4) applies to co-operative banks, not to a non-bank co-operative society receiving such income, so the interest from such deposits falls within the deduction provision and the disallowance is unsustainable.

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Issues: Whether a co-operative housing society is entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest income earned from fixed deposits and savings accounts maintained with co-operative banks.

Analysis: The assessee was a co-operative society and not a co-operative bank. The statutory scheme of section 80P(1) allows deduction of income of a co-operative society to the extent specified in section 80P(2). Under section 80P(2)(d), interest or dividend derived by a co-operative society from its investments with any other co-operative society is deductible in full. The bar under section 80P(4) applies only to co-operative banks and not to a co-operative housing society. The banks with which the assessee had invested were treated as co-operative societies carrying on banking business, and the interest income from such deposits therefore fell within the scope of section 80P(2)(d).

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the interest income earned from the co-operative banks, and the disallowance was unsustainable.

Ratio Decidendi: Interest income derived by a co-operative society from investments with another co-operative society qualifies for deduction under section 80P(2)(d), and the exclusion in section 80P(4) does not apply to a non-bank co-operative society receiving such income.

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