Co-operative society interest on deposits with co-operative banks qualifies for deduction under section 80P(2)(d).

Interest earned by a co-operative society from fixed deposits and investments with co-operative banks was held deductible under section 80P(2)(d). The Tribunal applied its earlier coordinate bench view that, for this limited purpose, a co-operative bank is treated as a co-operative society notwithstanding section 80P(4). It held that interest derived by one co-operative society from investments with another co-operative society falls within the statutory deduction, so the denial by the lower authorities was unsustainable.

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

Analysis: The Tribunal followed its earlier coordinate bench decisions and the view favourable to the assessee that, notwithstanding section 80P(4), a co-operative bank continues to be a co-operative society for the limited purpose of section 80P(2)(d). It noted that the relevant test is whether the income is by way of interest derived by a co-operative society from investments with another co-operative society, and held that interest earned from deposits with co-operative banks falls within that provision. On that basis, the denial of deduction by the lower authorities was found unsustainable.

Conclusion: The interest income from deposits with co-operative banks is deductible under section 80P(2)(d), and the assessee succeeds on the disputed issue.

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