Co-operative society interest deduction upheld for deposits with a co-operative bank under section 80P(2)(d).

Interest earned by a co-operative housing society from fixed deposits placed with a co-operative bank qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal applied the view that a co-operative bank remains a co-operative society for this purpose, and that section 80P(4) excludes only the bank's own claim to deduction, not the investing society's entitlement. On that construction, the society's deduction claim was allowed and the disallowance was held unsustainable.

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Issues: Whether the assessee-co-operative housing society was entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 in respect of interest earned from fixed deposits with a co-operative bank.

Analysis: The deduction under section 80P(2)(d) applies to income by way of interest or dividends derived by a co-operative society from its investments with any other co-operative society. The reasoning followed earlier Tribunal decisions holding that a co-operative bank continues to be a co-operative society for this purpose, and that section 80P(4) only excludes a co-operative bank claiming deduction for itself and does not defeat the claim of an investing co-operative society. The view was reinforced by the principle that, where two reasonable constructions of a taxing provision are possible, the one favouring the assessee should be adopted.

Conclusion: The assessee was entitled to the deduction under section 80P(2)(d), and the disallowance was unsustainable.

Ratio Decidendi: Interest earned by a co-operative society from investments made with a co-operative bank qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961, and section 80P(4) does not bar such a claim by the investing society.

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