Section 80P(2)(d) deduction for interest on co-operative bank deposits allowed for a co-operative society

Interest income earned by a co-operative society on surplus-fund deposits with co-operative banks was treated as income from investments covered by Section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal reasoned that the statutory allowance extends to income derived by a co-operative society from investments with other co-operative societies, and the interest in question was referable to such investments. The contrary view taken in assessment and first appeal was therefore unsustainable, and the disallowance was set aside in favour of the assessee.

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Issues: Whether interest income earned by a co-operative society on deposits made with co-operative banks qualified for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The claim turned on the scope of Section 80P(2)(d), which exempts income derived by a co-operative society from investments held with other co-operative societies. The interest income in question arose from deposits made out of surplus funds. On that basis, the Tribunal held that the income was referable to investments made by the assessee co-operative society and fell within the statutory allowance, and the contrary view taken in the assessment and first appeal was not sustainable.

Conclusion: The interest income was held to be deductible under Section 80P(2)(d), and the disallowance was set aside in favour of the assessee.

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