Co-operative credit society deposit interest remains business-attributable income and qualifies for the section 80P(2) deduction.

Interest earned by a co-operative credit society on deposits with co-operative banks, where sourced from income or surplus of its credit-facility business, retains the character of profits and gains attributable to that business. The restriction applicable to co-operative banks does not disqualify a society that is not itself a co-operative bank. Such interest is therefore eligible for deduction under section 80P(2) of the Income-tax Act, 1961.

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Issues: Whether a co-operative credit society is entitled to deduction under section 80P(2) in respect of interest earned on deposits with co-operative banks.

Analysis: Interest earned by a co-operative credit society from depositing income or surplus arising from its credit-facility business retains the character of profits and gains attributable to that business. The society was not a co-operative bank, and the restriction applicable to co-operative banks did not disentitle it from the statutory deduction.

Conclusion: The interest earned on deposits with co-operative banks is eligible for deduction under section 80P(2) of the Income-tax Act, 1961, in favour of the assessee.

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