Deduction under Section 80P(2)(d) for interest from deposits in another cooperative society confirmed; qualification upheld.

The article addresses whether interest earned by a co-operative society on deposits with another co-operative bank qualifies for deduction under Section 80P(2)(d), applying the statutory definition of "co-operative society" in Section 2(19) to include societies registered under state co-operative laws. It treats the Totgars decision as distinguishable and relies on the Thorapadi Urban Co op Credit Society ratio that a co-operative bank registered under the Co operative Societies Act falls within the term. Conclusion: interest on deposits with the co-operative bank qualifies for deduction under the provision.

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Issues: Whether interest income earned by a co-operative society on deposits made with another co-operative bank/society qualifies for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The dispute turns on the scope of Section 80P(2)(d) of the Income-tax Act, 1961 which provides deduction for income by way of interest or dividends derived by a co-operative society from its investment with any other co-operative society, and on the definition of "co-operative society" in Section 2(19) of the Income-tax Act, 1961 which encompasses societies registered under state co-operative laws. Relevant precedents were examined; the Supreme Court decision in Totgars concerned a different limb of Section 80P and is distinguishable. The Division Bench of the Madras High Court in Thorapadi Urban Co-op Credit Society Ltd applied the statutory definition and concluded that a co-operative bank registered under the Co-operative Societies Act falls within the term "co-operative society" for Section 80P(2)(d) purposes. The facts in the present case match those decisions and the ratio is applicable.

Conclusion: Deduction under Section 80P(2)(d) of the Income-tax Act, 1961 is allowable in respect of interest income earned by the assessee on deposits with the co-operative bank; the appeal is allowed in favour of the assessee.

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