“Section 3(2)(d)”
The decision most relied on for Section 3(2)(d) is CIT v. Vegetable Products Ltd. (88 ITR 192), cited in 2,664 judgments on BharatTax.
Leading authorities on Section 3(2)(d)
When two equally plausible interpretations of a taxing provision are possible, or when conflicting views exist from non-jurisdictional High Courts, the interpretation that favors the assessee must be adopted.
The interest income earned by a cooperative society from investing its surplus funds in fixed deposits with banks is not "derived from" its eligible business activities and is taxable as "income from other sources" under Section 56, thus not qualifying for deduction under Section 80P.
Interest income earned by a cooperative society from surplus deposits or investments held with a cooperative bank is not eligible for deduction under Section 80P(2)(d) of the Act.
Section 80P(4) serves as a proviso to Section 80P(1) and (2), excluding only cooperative banks that are cooperative societies and possess an RBI license for banking business. Its purpose is to exclude cooperative banks operating like commercial banks that lend money to the public.
Income arising from a cooperative society's surplus funds invested in short-term deposits and securities is not attributable to the society's core activities and, therefore, is not eligible for exemption under Section 80P(2)(a)(i) of the Income-tax Act.
Interest income earned by a cooperative society from its investments or surplus deposits with a cooperative bank is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.
The "Purpose Test" determines whether an incentive or subsidy is a capital or revenue receipt for income tax purposes. If the incentive's purpose is to enable an assessee to set up a new industry or make investments in capital assets, it is a capital receipt and not taxable.
When there is a conflict between the decisions of non-jurisdictional High Courts, the view that favors the assessee should be preferred.
