Deduction under section 80P(2)(d) allowed for interest from co-operative bank deposits; disallowance held unsustainable.

Interest income earned by a co-operative housing society from deposits with co-operative banks was held to qualify for deduction under section 80P(2)(d) because a co-operative bank is treated as a co-operative society for that provision. Section 80P(4) was read as restricting only co-operative banks from claiming the deduction for themselves, not as denying deduction to recipients of interest from such banks. With divergent views, the construction favourable to the assessee was preferred, so the disallowance was unsustainable.

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

Analysis: The deduction under section 80P(2)(d) applies where a co-operative society earns interest or dividend income from investments with any other co-operative society. A co-operative bank continues to be a co-operative society for this purpose, while section 80P(4) operates only to deny the benefit to co-operative banks claiming deduction for themselves. The issue was treated as covered by earlier tribunal decisions, and where divergent views exist, the construction favourable to the assessee was preferred.

Conclusion: The interest income from co-operative bank deposits qualified for deduction under section 80P(2)(d), and the disallowance was unsustainable.

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