Deduction under section 80P(2)(d) for cooperative society interest from cooperative banks remitted to AO for verification.

The note addresses entitlement of a cooperative society to deduction for income by way of interest or dividend earned from investments with other cooperative societies, including cooperative banks, under the statutory deduction provision. It reasons from the statutory definition of cooperative society to treat deposits with cooperative banks as qualifying investments, citing supporting High Court authority. Because the assessing officer did not accept the assessee's bifurcation of interest from cooperative banks, the matter was remitted to the AO for verification of interest income from cooperative banks, and the appeal was allowed for statistical purposes.

---

---

Issues: Whether the deduction claimed under section 80P(2)(d) of the Income-tax Act, 1961 in respect of interest income from investments with cooperative banks/societies was rightly disallowed by the Assessing Officer and confirmed by the CIT(A).

Analysis: The assessee is a registered cooperative society deriving interest income from investments with cooperative banks and other banks. Section 80P(2)(d) allows deduction for interest or dividend derived by a cooperative society from its investment with any other cooperative society; the term "cooperative society" is defined in section 2(19) of the Income-tax Act, 1961. The Assessing Officer disallowed the claimed deduction on the basis of an assumed bifurcation of interest income without considering the detailed documentary bifurcation submitted by the assessee. The Tribunal noted consistent judicial authority recognizing that interest income from investments in cooperative societies/banks is eligible for deduction under section 80P(2)(d). Given the assessee's claim of providing particulars showing the correct bifurcation and the absence of proper verification by the Assessing Officer, the matter required factual verification rather than summary disallowance. Accordingly the Tribunal remitted the issue to the jurisdictional Assessing Officer for verification of the interest income from cooperative banks, directing that on due verification the deduction be allowed in accordance with law and that the assessee be afforded a reasonable opportunity in the set-aside proceedings.

Conclusion: The disallowance under section 80P(2)(d) is not sustained; the matter is set aside and remitted to the Assessing Officer for verification and consequent grant of deduction if established. The appeal is allowed for statistical purposes in favour of the assessee.

---