Deductibility of interest from cooperative bank deposits treated as cooperative society income permitting deduction under tax law precedent.

Issue concerns whether interest on deposits with a cooperative bank qualifies for deduction under section 80P(2)(d) as income of a cooperative society. The note records reliance on binding higher-court precedent characterising cooperative banks as cooperative societies and on coordinate-bench authority; that precedent treatment was applied to the assessed interest income which had been disallowed by lower authorities. Operative legal points: characterisation of cooperative banks, treatment of interest income from cooperative-bank deposits as cooperative-society receipts, and application of binding precedent to quash the addition.

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Issues: (i) Whether interest earned by a cooperative society from deposits placed with a cooperative bank is deductible under section 80P(2)(d) of the Income-tax Act, 1961.

Analysis: The matter concerns allowance of deduction for interest from deposits with a cooperative bank claimed under section 80P(2)(d) of the Income-tax Act, 1961. The Tribunal noted that the issue had been considered by coordinate benches and the Hon'ble Supreme Court, which characterised cooperative banks as cooperative societies rather than banks under the Banking Regulation Act, 1949. The Tribunal relied on binding Supreme Court authority and relevant coordinate bench decisions, and applied those precedents to the facts where interest of Rs. 1,41,392/- was earned from deposits in a cooperative bank and disallowed by the assessing and appellate authorities. The appeal was heard ex parte for the assessee due to non-appearance, and the Tribunal applied the precedents to quash the addition.

Conclusion: The interest earned from deposits placed with the cooperative bank is deductible under section 80P(2)(d) of the Income-tax Act, 1961; the addition of Rs. 1,41,392/- is quashed and the appeals are allowed in favour of the assessee.

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