Section 80P(2)(d) deduction applies to interest from co-operative banks; limited adjustments under section 143(1)(a) cannot widen disallowance.

Section 143(1)(a) permits only limited adjustments at intimation stage, so a Chapter VI-A deduction under section 80P(2)(d) cannot be disallowed unless the claim is beyond the return's scope or otherwise an apparent incorrect claim. Interest earned by a co-operative housing society from deposits with co-operative banks is treated as interest from investments with another co-operative society for section 80P(2)(d). Section 80P(4) does not bar the claim where the assessee itself is not a co-operative bank. Deduction is therefore available on such interest income, subject to any specific bank interest excluded on the facts recorded.

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Issues: (i) Whether disallowance of deduction under section 80P(2)(d) could be made while processing the return under section 143(1)(a); (ii) Whether interest income earned by a co-operative housing society from deposits placed with co-operative banks qualified for deduction under section 80P(2)(d), and whether section 80P(4) barred such claim.

Issue (i): Whether disallowance of deduction under section 80P(2)(d) could be made while processing the return under section 143(1)(a).

Analysis: The adjustment power under section 143(1)(a) is limited to the specific categories mentioned therein. Disallowance of a Chapter VI-A deduction is permissible only where the return is furnished beyond the due date, or where the claim is otherwise an incorrect claim apparent from the return. A claim under section 80P(2)(d) is not a claim that exceeds a prescribed monetary limit, percentage, ratio, or fraction, and the disallowance made in this case did not fall within the permissible scope of section 143(1)(a).

Conclusion: The disallowance under section 143(1)(a) was not sustainable.

Issue (ii): Whether interest income earned by a co-operative housing society from deposits placed with co-operative banks qualified for deduction under section 80P(2)(d), and whether section 80P(4) barred such claim.

Analysis: A co-operative bank is also a co-operative society for the purposes of the relevant statutory framework. Section 80P(2)(d) allows deduction of income by way of interest or dividends derived by a co-operative society from investments with any other co-operative society. Since the assessee was not a co-operative bank, section 80P(4) did not apply to it. The interest earned from co-operative banks, therefore, qualified for deduction under section 80P(2)(d), except for the identified bank interest that was not eligible on the facts recorded.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on interest income from co-operative banks, subject to the excluded bank interest identified in the order.

Final Conclusion: The assessee's claim was substantially accepted, the adverse order was set aside to that extent, and the appeal succeeded only in part.

Ratio Decidendi: A disallowance of deduction cannot be made in intimation proceedings under section 143(1)(a) unless it falls within the limited statutory grounds for adjustment, and interest earned by a co-operative society from investments with another co-operative society remains deductible under section 80P(2)(d) unless specifically excluded by statute.

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