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

Interest income earned by a co-operative credit society from fixed deposits with co-operative banks was held to fall within section 80P(2)(d), because that provision allows deduction for income derived by a co-operative society from investments with another co-operative society. The distinction from section 80P(2)(a)(i) was accepted, and the reasoning that interest on surplus or idle funds may fail under that clause did not control the result here. The Tribunal therefore treated the interest as eligible for deduction under section 80P(2)(d), and the disallowance was unsustainable.

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Issues: Whether interest income earned by a co-operative credit society from fixed deposits maintained with co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The issue turned on the scope of section 80P(2)(d), which allows deduction for interest or dividend income derived by a co-operative society from investments with any other co-operative society. The competing view below had relied on decisions applying section 80P(2)(a)(i) and on the principle that interest on surplus or idle funds may not qualify for deduction under that clause. The Tribunal, however, accepted the distinction between section 80P(2)(a)(i) and section 80P(2)(d), and followed judicial precedent holding that interest earned by a co-operative society from deposits with co-operative banks falls within the statutory language of section 80P(2)(d).

Conclusion: The assessee was eligible for deduction under section 80P(2)(d) on interest earned from co-operative banks, and the disallowance was not sustainable.

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