Co-operative society deduction on interest from co-operative banks upheld; section 80P(4) did not bar the claim.

A co-operative society was held eligible for deduction under section 80P(2)(d) on interest earned from deposits and investments with co-operative banks, because such banks were treated as co-operative societies for this purpose. The Tribunal followed the jurisdictional High Court's consistent view on materially similar facts and held that section 80P(4) did not, by itself, deny the recipient co-operative society this deduction. Interest attributable to non-co-operative banks was only incidental and did not alter the relief on the disputed income. The Revenue's challenge therefore failed and the deduction sustained.

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Issues: Whether the assessee, a co-operative society, was entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest earned from deposits and investments placed with co-operative banks, and whether section 80P(4) disentitled such claim.

Analysis: The assessee was held to be a co-operative society and not a co-operative bank. The interest in dispute was substantially earned from co-operative banks registered as co-operative societies, while only a small part arose from non-co-operative banks. The jurisdictional High Court had already held, in materially similar facts, that a co-operative bank continues to be a co-operative society for the purposes relevant to section 80P(2)(d), and that section 80P(4) does not alter the position of the recipient co-operative society so as to deny deduction on interest derived from such investments. The Tribunal therefore followed the binding and consistent view in favour of the assessee.

Conclusion: Deduction under section 80P(2)(d) on interest earned from co-operative banks was allowable, and the Revenue's challenge to the relief granted by the first appellate authority failed.

Final Conclusion: The Revenue's appeals were rejected and the relief granted to the assessee on the disputed interest income was sustained.

Ratio Decidendi: For purposes of section 80P(2)(d), interest earned by a co-operative society from deposits or investments with a co-operative bank that is itself a co-operative society remains eligible for deduction, and section 80P(4) does not by itself deny that benefit to the recipient society.

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