Section 80P deduction turns on whether interest recipient is a co-operative society or a co-operative bank, requiring factual verification.

Interest income from investments with a co-operative society may qualify for deduction under section 80P(2)(d), but the exclusion in section 80P(4) applies where the recipient is a co-operative bank engaged in banking business within section 5(b) of the Banking Regulation Act. The claim therefore turned on the factual status of the recipient institutions, and that status had to be verified before any final determination. The matter was remanded to the Assessing Officer for verification of whether the entities from which interest was received were co-operative banks carrying on banking business, and the deduction claim was left open for reconsideration.

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Issues: Whether interest income earned from co-operative banks was eligible for deduction under section 80P(2)(d), and whether the matter required verification of whether those entities were co-operative banks carrying on banking business within the meaning of the Banking Regulation Act.

Analysis: The claim for deduction depended on the character of the recipient entity. The governing principle applied was that interest from investments with a co-operative society may qualify under section 80P(2)(d), but the exclusion in section 80P(4) applies where the recipient is a co-operative bank engaged in banking business as defined in section 5(b) of the Banking Regulation Act. The record showed a dispute on whether the banks from which interest was received satisfied that description. In view of the Supreme Court and co-ordinate bench guidance relied upon, the factual status of the recipient institutions had to be verified before a final determination could be made.

Conclusion: The deduction claim was not finally adjudicated and the matter was restored to the Assessing Officer for verification of the status and activity of the co-operative banks. The assessee obtained a remand for reconsideration of the deduction claim.

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