THE VENUS CO.OP. HSG. SOC. LTD.,MUMBAI vs. I T O WARD 22(3)(1), MUMBAI

IN THE INCOME TAX APPELLATE TRIBUNAL “K(SMC)” BENCH MUMBAI BEFORE MS. KAVITHA RAJAGOPAL, JUDICIAL MEMBER & SHRI MAKARAND VASANT MAHADEOKAR, ACCOUNTANT MEMBER ITA No. 2747/Mum/2026 (Assessment Year: 2018-19) The Venue Co. Op. ITO Ward 22(3)(1), Hsg. Soc. Ltd. Piramal Chamber, Central Office, Venus Vs. Mumbai-400 012 CHS Ltd. Dr. R. G. Thadani Marg, Worli, Mumbai-400 018 PAN/GIR No. AAAAT5811F (Applicant) (Respondent) Assessee by Shri Hiten Vasant, Ld. AR Revenue by Shri Sumit Kumar Jha, Ld. DR Date of Hearing 07.05.2026 Date of Pronouncement 20.05.2026 आदेश / ORDER PER MAKARAND VASANT MAHADEOKAR, AM: The present appeal is directed against the order passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as "CIT(A)"], dated 17.02.2026, arising out of the assessment order passed by the Assessing Officer under section 143(3) read with

2 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. section 144B of the Income-tax Act, 1961 [hereinafter referred to as "the Act"]dated 20.04.2021 for the Assessment Year 2018–19. 2. Briefly stated, the assessee is a co-operative housing society registered under the Maharashtra Co-operative Societies Act, 1960. The return of income for the year under consideration was filed on 30.10.2018 declaring total income of Rs. 6,78,530/- after claiming deduction under Chapter VI-A. The return was subsequently revised on 13.06.2019 declaring total income of Rs. 33,49,266/- after claiming deduction under section 80P(2)(d) of the Act. The case was selected for complete scrutiny under the E- assessment Scheme, 2019 on the issue of “Deduction from total income under Chapter VI-A” and statutory notices under sections 143(2) and 142(1) were issued from time to time through the faceless assessment mechanism. 3. During the course of assessment proceedings, it was observed by the Assessing Officer that the assessee had earned interest income aggregating to Rs. 39,09,454/- from deposits placed with co-operative banks and other financial institutions. The details of such interest income comprised savings bank interest of Rs. 3,14,701/-, interest on bank FDRs of Rs. 35,76,269/- and interest on security deposits of Rs. 18,488/-. Against such income, the assessee claimed deduction under section 80P(2)(d) amounting to Rs. 33,49,266/-. The assessee, in response to the show cause notice issued by the Assessing Officer, submitted that it is a co-operative housing society engaged in maintenance of buildings and collection of

3 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. contributions from members and that the interest income earned from investments with co-operative banks is eligible for deduction under section 80P(2)(d) of the Act. It was contended that the said provision allows deduction in respect of income by way of interest or dividend derived from investments with any other co-operative society and that co-operative banks fall within the ambit of co- operative society. The assessee also relied upon various judicial precedents in support of its claim. 4. The Assessing Officer, however, did not accept the submissions of the assessee and held that the interest income earned from surplus funds invested in co-operative banks and other institutions is not attributable to the business activity of the assessee and is assessable under the head “Income from other sources” under section 56 of the Act. It was further held that deduction under section 80P(2)(d) is not available in respect of such income, as the same is not derived from investments with co-operative societies in the manner contemplated under the Act. The Assessing Officer relied upon judicial precedents including the decision of the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. [2010] 188 taxmann.com 282to conclude that interest on surplus funds is not eligible for deduction under section 80P. Accordingly, the claim of deduction of Rs. 33,49,266/- was disallowed and added back to the total income of the assessee. The total income was thus assessed at Rs. 40,27,792/-.

4 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 5. Aggrieved, the assessee carried the matter in appeal before the learned CIT(A). Before the learned CIT(A), the assessee reiterated that the interest income earned from investments with co-operative banks qualifies for deduction under section 80P(2)(d) and that the Assessing Officer erred in treating such income as “Income from other sources”. It was further contended that the provisions of section 80P(4) are applicable only to co-operative banks and not to co-operative societies and therefore do not disentitle the assessee from claiming deduction. The assessee also relied upon various judicial precedents including decisions of the Co-ordinate Bench, and contended that similar claims have been allowed in earlier years. 6. The learned CIT(A), after considering the assessment order and submissions of the assessee, upheld the action of the Assessing Officer. It was observed that the interest income earned by the assessee from deposits with co-operative banks and commercial banks is not attributable to the operational activities of the assessee and is assessable as income from other sources. The learned CIT(A) further held that co-operative banks are distinct from co-operative societies and that, in view of the insertion of section 80P(4), the benefit of deduction under section 80P is not available in respect of interest income earned from such banks. The reliance placed by the assessee on judicial precedents was held to be distinguishable. Accordingly, the disallowance of Rs. 33,49,266/- made by the Assessing Officer was confirmed and the appeal of the assessee was dismissed.

5 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 7. The assessee is in further appeal before us and has raised the following grounds of appeal:

1 (a) The learned Commissioner of Income Tax (Appeals) erred in considering the decision of the learned Assessing officer of disallowing the claim of the appellant for deduction of Rs.32,99,266/- u/s.80P(2)(d) of the I.T. Act, 1961 being Rs.50,000 u/s 80P(2)(c)(ii) and Rs.33,49,266/- u/s. 80P(2)(d), as justified without appreciating the fact that the said first amount is statutory deduction mandated for every cooperative society and the second amount constitutes interest on investment made with the cooperative banks. (b) The learned Commissioner of Income Tax (Appeals) erred in relying on Hon‟ble Supreme Court in Totgars Co-operative Sale Society Ltd. (2010) 322 ITR 283 (SC) and The Hon‟ble Karnataka High Court in PCIT Vs Totagars Co-operative Sale Society (2017) 83 taxmann.com 140 and holding that “The interest income is earned from surplus funds invested in co-operative banks/ commercial banks, which are not a part of operational activity but are surplus funds and that such surplus funds are assessable as “Income from Other Sources” and not as business income attributable to activities specified u/s 80P(2)” and that the deduction from income of Cooperative Banks admissible to cooperative society is withdrawn w.e.f. A.Y. 2007-08, by way of insertion of Section (4) to Section 80P by the Finance Act, 2006, therefore appellant is not entitled for deduction u/s. 80P(2)(d) of the Act, without appreciating that the facts of these case laws are distinguishable and that they deal with section 80(P)(2)(a) of the Income Tax Act, 1961 and not Section 80(P) (2) (d) of the Income Tax Act, 1961, which is the relevant section. (c) The learned Commissioner of Income Tax (Appeals) erred in ignoring the various jurisdictional judicial precedents and the assessee‟s own case for AY 2014-15 and AY 2015-16, duly submitted during the appellate proceedings. Your appellant prays that the deduction claimed u/s. 80P (2) (d) of the Act may kindly be restored as the premises on the Learned Commissioner of Income Tax (Appeals) are incorrect and not factual.

6 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 2. Your appellant prays that the interest charged u/s.234B, of the I.T. Act, 1961 aggregating to Rs.1,05,376/- and u/s 234C of the I.T. Act, 1961 of Rs.18,738/- may kindly be deleted. 3. Your appellant prays that initiating penalty proceedings u/s. 270A of the I.T. Act, 1961 be quashed, as the appellant has neither under reported/ mis-reported any income. The action of the Assessing Officer is unwarranted, unjustified and misconceived. 4. Your appellant craves leave, to add, alter or amend any of the grounds of appeal or make a fresh ground(s) of appeal on or before the date of hearing. 8. During the course of hearing before us, the learned Authorised Representative (AR) reiterated the facts and submitted that the issue involved is squarely covered in favour of the assessee by judicial precedents and placed reliance on the decision of the Hon’ble Karnataka High Court in the case of Principal Commissioner of Income-tax vs. Totagars Co- operative Sale Society(2017) 392 ITR 74 (Karnataka).Referring to the aforesaid judgment, the learned AR submitted that the Hon’ble High Court has categorically held that for the purpose of section 80P(2)(d), a co-operative bank is to be considered as a co-operative society and consequently, any interest earned by a co-operative society from deposits with a co- operative bank would be eligible for deduction under the said provision.

7 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. that interest income earned by a co-operative housing society from investments made with co-operative banks is eligible for deduction under section 80P(2)(d) of the Act. 10. The learned AR further submitted that the issue under consideration is squarely covered in favour of the assessee in its own case in earlier years. It was pointed out that for Assessment Years 2014–15 and 2015–16, the learned Commissioner of Income-tax (Appeals) has accepted the claim of the assessee and allowed deduction under section 80P(2)(d) of the Act in respect of interest income earned from investments with co-operative banks. It was thus contended that in the absence of any change in facts or law, the principle of consistency ought to be followed and the claim of the assessee deserves to be allowed. 11. Relying on the aforesaid judicial precedents, the learned AR submitted that the disallowance made by the Assessing Officer and confirmed by the learned CIT(A) is contrary to the settled legal position and the deduction claimed under section 80P(2)(d) in respect of interest income earned from co-operative banks deserves to be allowed. 12. The learned Departmental Representative, on the other hand, relied upon the orders of the lower authorities and submitted that the interest income earned by the assessee, not being operational income, is in the nature of income from other sources and not attributable to the business activity of the

8 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. assessee, and therefore, the deduction under section 80P(2)(d) has been rightly denied. 13. We have heard the rival submissions and perused the material available on record. The sole issue for our consideration is whether the assessee, being a co-operative housing society, is entitled to deduction under section 80P(2)(d) of the Act in respect of interest income earned from investments made with co- operative banks. 14. The Assessing Officer has disallowed the claim on the premise that the interest income is not attributable to the business activity of the assessee and is assessable under the head “Income from other sources” under section 56 of the Act. The Assessing Officer has further held that deduction under section 80P(2)(d) is not available in respect of such income, placing reliance on the decision of the Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd. (supra). The learned CIT(A) has upheld the said view by holding that co- operative banks are distinct from co-operative societies and by invoking the provisions of section 80P(4) of the Act. 15. In order to adjudicate the controversy, it is necessary to examine the statutory provision. Section 80P(2)(d) provides that in respect of “any income by way of interest or dividends derived by the co-operative society from its investments with any other co-operative society, the whole of such income” shall be deducted in computing the total income. Thus, the essential requirement

9 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. for claiming deduction is that the income must be (i) by way of interest or dividend, and (ii) derived from investments with “any other co-operative society”. 16. The expression “co-operative society” has been defined in section 2(19) of the Act to mean a co-operative society registered under the Co-operative Societies Act, 1912 or under any other law for the time being in force in any State. There is no dispute that a co-operative bank is also registered as a co-operative society under the relevant State Co-operative Societies Act. The controversy, however, arises on account of insertion of section 80P(4) by the Finance Act, 2006, which provides that the provisions of section 80P shall not apply in relation to any co- operative bank other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank. 17. A plain reading of section 80P(4) shows that it restricts the eligibility of deduction in the hands of a co-operative bank. It does not alter the character of a co-operative bank as a co- operative society for the purpose of section 2(19) of the Act. In other words, section 80P(4) disentitles a co-operative bank from claiming deduction under section 80P, but it does not take away the eligibility of a co-operative society to claim deduction under section 80P(2)(d) in respect of interest earned from investments with a co-operative bank. 18. The aforesaid legal position has been examined by the Hon’ble Karnataka High Court in the case of Principal

10 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. Commissioner of Income-tax vs. Totagars Co-operative Sale Society (supra), wherein it has been held that a co-operative bank is a species of the genus “co-operative society” and, therefore, interest earned by a co-operative society from a co- operative bank is eligible for deduction under section 80P(2)(d). The Hon’ble High Court, after considering the earlier decision of the Hon’ble Supreme Court in Totgars Co-operative Sale Society Ltd. (322 ITR 283), distinguished the same by observing that the said decision was rendered in the context of section 80P(2)(a)(i) and not section 80P(2)(d). The relevant paras read as under:

11 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 6. According to the learned counsel, the present appeal should be admitted on these two substantial questions of law. 7. However, the contention being taken by the learned counsel is untenable. For the issue that was before the ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co- operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to be a Co-operative Society, then any interest earned by the Co-operative Society from a Co- operative Bank would necessarily be deductible under Section 80P(1) of the Act. 8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover, the word "Co- operative Society" are the words of a large extent, and denotes a genus, whereas the word "Co-operative Bank" is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co-Operative Society can be of different nature, and can be involved in different activities; the Co-operative Society Bank is merely a variety of the Co-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word "Co-operative Society". 9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-Operative Society bank as the meaning of Co-Operative Society. Therefore, a Co-operative Society Bank would be included in the words 'Co-operative Society'. 10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank. Therefore, according to Sec. 80P(2)(d) of the I.T. Act, the said amount of interest earned from a Co- operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess its total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent. 11. The learned counsel has relied on the case of Totgars Co-operative Sale Society Ltd. v. ITO [2010] 322ITR 283/188 Taxman 282 (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section

12 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 80P(2)(d) of the I.T. Act and not Section 80P(2)(a)(i) of the I.T. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of law canvassed by the learned counsel for the Revenue even arise in the present case. 12. For the reasons stated above, this Court does not find any merit in the present appeal. Hence, the appeal is dismissed. 19. Similarly, the co-ordinate bench in the case of Kaliandas Udyog Bhavan Premises Co-op Society Ltd. vs. ITO(supra) has held that the interest income earned by a co-operative society from investments with a co-operative bank is eligible for deduction under section 80P(2)(d). The Co-ordinate Bench has categorically observed:

“as long as it is proved that the interest income is being derived by a co- operative society from its investments made with any other co-operative society, the claim of deduction… would be duly available… a co- operative bank continues to be a co-operative society… therefore… interest income… would be entitled for claim of deduction under Sec.80P(2)(d)” (para 7) 20. On the other hand, the reliance placed by the lower authorities on the decision of the Hon’ble Supreme Court in Totgars Co-operative Sale Society Ltd. (322 ITR 283) is misplaced. The Hon’ble Supreme Court in the said case was dealing with deduction under section 80P(2)(a)(i) in respect of interest income on surplus funds, and not with the scope of section 80P(2)(d). The ratio laid down therein cannot be extended to deny deduction under section 80P(2)(d), which is a distinct and independent provision.

13 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. 21. Further, it is an admitted position that in assessee’s own case for earlier assessment years, the learned CIT(A) has allowed the claim of deduction under section 80P(2)(d) in respect of similar interest income. In the absence of any change in facts or law, the principle of consistency also supports the claim of the assessee. 22. In view of the above discussion and respectfully following the judicial precedents referred to hereinabove, we hold that the interest income earned by the assessee from investments made with co-operative banks is eligible for deduction under section 80P(2)(d) of the Act. The disallowance of Rs. 33,49,266/- made by the Assessing Officer and confirmed by the learned CIT(A) is, therefore, not sustainable. 23. As regards the grounds relating to charging of interest under sections 234B and 234C and initiation of penalty proceedings under section 270A, the same are consequential in nature and do not call for separate adjudication at this stage. 24. In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 20.05.2026.

Sd/- Sd/- (KAVITHA RAJAGOPAL) (MAKARAND VASANT MAHADEOKAR) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai, Dated 20/05/2026 Dhananjay, Sr.PS

14 ITA No. 2747/Mum/2026 The Venue Co. Op. Hsg. Soc. Ltd. आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपीलाथी / The Appellant 2. प्रत्यथी / The Respondent. 3. संबंधधत आयकर आयुक्त / The CIT(A) आयकर आयुक्त(अपील) / Concerned CIT 4. धिभागीय प्रधतधनधध, आयकर अपीलीय अधधकरण, मुम्बई / DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file. 6. आदेशानुसार/ BY ORDER, सत्याधपत प्रधत //True Copy// 1. उि/सहायक िंजीकार ( Asst. Registrar) आयकर अिीिीय अतिकरण, मुम्बई / ITAT, Mumbai