Section 80P(2)(d) deduction applies to interest on deposits with a co-operative bank, making the disallowance unsustainable.

Interest earned by a co-operative society on deposits placed with a co-operative bank was treated as income from investments covered by section 80P(2)(d), rather than business income under section 80P(2)(a)(i). On that basis, the deduction was held allowable because the income was derived from investments with a co-operative society and therefore fell within the statutory scope of section 80P(2)(d). The disallowance was not sustainable and the issue was decided in favour of the assessee.

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

Analysis: The interest income was earned on deposits made with a co-operative bank. The provision grants deduction in respect of income derived by a co-operative society from investments with other co-operative societies. The relevant distinction is that such income is attributable to investment income covered by section 80P(2)(d), rather than business income assessed under section 80P(2)(a)(i). The reasoning adopted held that the interest earned on surplus funds placed with a co-operative bank falls within the scope of the deduction provision.

Conclusion: The interest income was eligible for deduction under section 80P(2)(d), and the disallowance was not sustainable. The issue was decided in favour of the assessee.

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