Section 80P deduction for interest from co-operative bank investments upheld for co-operative society

Interest earned by a co-operative society from deposits or investments with a co-operative bank qualifies for deduction under section 80P(2)(d) when binding jurisdictional precedent treats the bank as a co-operative society for this purpose. Section 80P(4) excludes co-operative banks from claiming the section 80P benefit themselves, but does not deny a recipient co-operative society's deduction on such interest income. The Tribunal therefore rejected the Revenue's attempt to tax the amount under the head "income from other sources" under section 56 and allowed the deduction.

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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 in respect of interest income earned from deposits/investments with co-operative banks and whether the Revenue could deny the claim by treating such interest as income from other sources.

Analysis: The Tribunal noted that the controversy was covered by binding jurisdictional precedent holding that interest earned by a co-operative society from investment of surplus funds with another co-operative society, including a co-operative bank carrying on banking activities, qualifies for deduction under section 80P(2)(d). It further noticed that section 80P(4) excludes only co-operative banks from the benefit of section 80P as such, but does not remove the eligibility of a recipient co-operative society claiming deduction on interest derived from investments with a co-operative society. The Tribunal followed the recent High Court decision and the earlier decisions relied upon, and held that the Revenue's objection based on section 56 could not prevail against the specific deduction provision.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the impugned interest income, and the Revenue's challenge failed.

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