Co-operative society investment interest remains deductible when fixed deposits are placed with a co-operative bank under section 80P(2)(d).

Interest earned by a co-operative housing society on fixed deposits with a co-operative bank qualifies for deduction under section 80P(2)(d). The provision covers interest or dividend income derived by a co-operative society from investments with another co-operative society, and a co-operative bank remains within that broader category. Section 80P(4) excludes a co-operative bank only from claiming its own deduction and does not restrict a depositor co-operative society's deduction. Classification of the interest as income from other sources does not prevent the specific deduction for eligible investment income. Accordingly, the stated disallowances were deleted.

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Issues: Whether a co-operative housing society is entitled to deduction under section 80P(2)(d) of the Income-tax Act, 1961 on interest earned from fixed deposits with a co-operative bank.

Analysis: Section 80P(2)(d) allows deduction of interest or dividend income derived by a co-operative society from investments with another co-operative society. A co-operative bank remains a species of the broader genus of co-operative societies for this purpose. Section 80P(4) excludes a co-operative bank only when that bank itself claims deduction under section 80P; it does not restrict the deduction available to another co-operative society earning interest from deposits with such bank. The classification of the interest under the head income from other sources does not preclude deduction under section 80P(2)(d), which specifically covers such investment income.

Conclusion: The interest earned from deposits with the co-operative bank qualifies for deduction under section 80P(2)(d) of the Income-tax Act, 1961; the disallowances for both assessment years were deleted in favour of the assessee.

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