Co-operative society deduction under section 80P(2)(d) sustained, and reassessment reopening based on contrary view was quashed.

A co-operative society's interest income from investments with co-operative banks was held to remain eligible for deduction under section 80P(2)(d). The Court applied the principle that section 80P(4) excludes only co-operative banks functioning as banks and does not deny the section 80P(2)(d) benefit to a co-operative society. Relying on binding precedent, it found the reassessment notice, the section 148A(3) order and the section 148A(1) show-cause notices unsustainable because they proceeded on the contrary view. The assessee's challenge therefore succeeded and the reopening action was quashed.

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Issues: Whether the reopening notice and the connected order under the reassessment regime were liable to be quashed on the ground that the assessee, being a co-operative society and not a co-operative bank, was entitled to deduction under section 80P(2)(d) on interest income earned from investments with co-operative banks.

Analysis: The petitioner was treated as a co-operative society whose banking licence had been cancelled, and the issue was held to be covered by the binding precedent relied upon by the Court. The governing principle applied was that section 80P(2)(d) allows deduction of interest or dividend income derived by a co-operative society from investments with other co-operative societies, and the exclusion in section 80P(4) is confined to co-operative banks functioning as banks and does not deny the benefit under section 80P(2)(d) to a co-operative society. The Court therefore accepted that the petitioner's claim was legally sustainable and that the impugned reassessment action, founded on a contrary view, could not stand.

Conclusion: The challenge succeeded and the reassessment notice, the order under section 148A(3), and the show-cause notices under section 148A(1) were quashed.

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