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Issues: Whether interest income earned by a co-operative society from deposits/investments with a co-operative bank registered as a co-operative society was eligible for deduction under section 80P(2)(d) of the Income-tax Act, 1961, and whether denial of deduction under section 80P(2)(a)(i) displaced that claim.
Analysis: The interest was earned from investments made out of surplus funds and not from transactions with a member, so deduction under section 80P(2)(a)(i) was not available. However, section 80P(2)(d) grants deduction in respect of interest derived by a co-operative society from its investments with any other co-operative society. The applicable statutory scheme draws a distinction between a co-operative bank and a co-operative society, and the fact that the recipient entity also held a banking licence did not alter its registration as a co-operative society for the purpose of section 80P(2)(d). The earlier authorities relied upon by the lower fora were distinguished on the footing that the present claim fell for consideration under section 80P(2)(d) and not under section 80P(2)(a)(i).
Conclusion: Deduction under section 80P(2)(d) was allowable to the assessee. The denial under section 80P(2)(a)(i) was sustained, but the assessee succeeded on the principal claim under section 80P(2)(d).
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