Deduction under section 80P for interest on deposits with other cooperative societies allowed based on cooperative society definition and precedent

Deduction under section 80P(2)(d) concerns interest or dividend income a cooperative society derives from investments with other cooperative societies; the statutory definition of cooperative society encompasses both cooperative banks and non-bank cooperative societies, so interest on deposits with other cooperative societies or cooperative banks qualifies for deduction. Reliance on prior high court authority supporting entitlement to deduction for inter-society interest was accepted, resulting in allowance of the interest income deduction for deposits placed with other cooperative banks.

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Issues: Whether interest of Rs. 1,52,829/- earned by the assessee from deposits with other co-operative banks is eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The assessee is a registered co-operative society that earned interest from deposits maintained with other co-operative banks. Section 80P(2)(d) provides deduction for income by way of interest or dividend derived by a co-operative society from its investment with any other co-operative society. Section 2(19) defines a cooperative society to include societies registered under the Cooperative Societies Act or other relevant state laws, encompassing cooperative banks. The factual record shows interest receipts from cooperative banks. The issue has been considered in consistent decisions of the Tribunal and High Court holding that interest earned from deposits with other co-operative societies/banks qualifies for deduction under section 80P(2)(d).

Conclusion: Deduction under section 80P(2)(d) is allowable in respect of the interest amount of Rs. 1,52,829/-. The addition made by the assessing officer is deleted and the appeal is allowed in favour of the assessee.

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