Section 80P deduction for co-operative society interest income from nationalised bank deposits upheld on consistent Tribunal view.

Interest earned by a co-operative society on deposits placed with nationalised banks was treated as income attributable to its business for deduction under section 80P(2) of the Income-tax Act, 1961. Following earlier coordinate bench decisions, the Tribunal accepted that deployment of surplus funds in banking instruments does not by itself remove the income from the scope of the deduction. The result was that the deduction was directed to be allowed on the interest income in question.

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Issues: Whether the assessee, being a co-operative society, was entitled to deduction under section 80P(2) of the Income-tax Act, 1961 on interest earned from deposits placed with nationalized banks.

Analysis: The issue was treated as covered by earlier coordinate bench decisions holding that interest earned from deployment of surplus funds in banking instruments remains income attributable to the business of the co-operative society for the purpose of section 80P. The Tribunal followed the consistent view that such interest does not cease to qualify merely because it arises from deposits with banks, and directed grant of the deduction on the interest income in question.

Conclusion: The assessee was held entitled to deduction under section 80P(2) of the Income-tax Act, 1961 on interest earned from nationalized banks.

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