Co-operative society deduction on interest from co-operative bank deposits upheld; debatable claim cannot be adjusted in processing.

Interest earned by a co-operative housing society from deposits with co-operative banks was held to qualify for deduction under section 80P(2)(d), because the expression "co-operative society" was read broadly and section 80P(4) was treated as excluding only a co-operative bank from its own claim, not from the payer-side deduction available to another co-operative society. The Tribunal also held that disallowance of the claim could not be made while processing the return under section 143(1), since the issue was supported by precedent and was debatable rather than an apparent mistake. The adjustment was therefore unsustainable and the deduction was to be allowed.

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Issues: (i) Whether interest income earned by a co-operative housing society from deposits with co-operative banks is eligible for deduction under section 80P(2)(d) despite section 80P(4); (ii) whether disallowance of such deduction could be made while processing the return under section 143(1).

Issue (i): Whether interest income earned by a co-operative housing society from deposits with co-operative banks is eligible for deduction under section 80P(2)(d) despite section 80P(4).

Analysis: The expression "co-operative society" in section 80P(2)(d) was held to be of wide import and to include co-operative banks for the purpose of investments made with them by another co-operative society. Section 80P(4) was held to exclude a co-operative bank only in its own assessment from claiming deduction under section 80P and not to curtail the deduction available to another co-operative society under section 80P(2)(d). The interest received from deposits with co-operative banks therefore fell within the statutory deduction.

Conclusion: The assessee was entitled to deduction under section 80P(2)(d) on the impugned interest income.

Issue (ii): Whether disallowance of such deduction could be made while processing the return under section 143(1).

Analysis: The claim was supported by judicial precedents and turned on interpretation of the relevant statutory provisions. It was therefore not an apparent or undisputed mistake amenable to prima facie adjustment under section 143(1), and the issue was debatable beyond the limited scope of processing.

Conclusion: The adjustment made under section 143(1) was not sustainable.

Final Conclusion: The disallowance was set aside and the deduction claimed by the assessee was directed to be allowed, resulting in success for the assessee on both substantive entitlement and the validity of the processing adjustment.

Ratio Decidendi: Section 80P(4) excludes a co-operative bank only from claiming deduction in its own assessment and does not deny deduction under section 80P(2)(d) to another co-operative society earning interest from investments with such bank; a debatable claim supported by precedent cannot be disallowed as a prima facie adjustment under section 143(1).

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