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Facts
The assessee, a co-operative housing society, claimed deduction under Section 80P(2)(d) for interest income earned from investments in co-operative banks. The Assessing Officer disallowed this claim, which was upheld by the CIT(A). The assessee appealed to the Tribunal.
Held
The Tribunal held that a co-operative bank is considered a co-operative society, and interest earned from investments in such banks is eligible for deduction under Section 80P(2)(d). Relying on Apex Court and various High Court and ITAT judgments, the Tribunal found the disallowance to be unjustified.
Key Issues
Whether interest income earned by a co-operative housing society from investments in co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income Tax Act, 1961.
Sections Cited
250, 143(1), 80P(2)(d), 80P(4)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCH “K(SMC
The instant appeal of the assessee was filed against the order of the Learned Commissioner of Income-tax Appeal / Addl / JCIT (A), Thiruvananthapuram [for brevity, ‘Ld.CIT(A)’] passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’), for Assessment Year 2020-21, date of order 07.03.2025. The impugned order was emanated from the order of the Central Processing Unit, Income-tax
We heard the rival submissions and considered the documents available on the record. The assessee is a co-operative housing society incorporated in March, 2012 and registered with the Registrar of Co-operative Societies. For impugned assessment year, the assesse filed the return declaring Nil income. The assesse, in the return had claimed deduction under section 80P(2)(d) of the Act, amount to Rs.1,75,460/- on account of interest received from investment in co-operative banks. The return was processed under section 143(1) of the Act and the said interest claimed as eligible for deduction under section 80P(2)(d), was added back to the total income. The aggrieved assesse filed an appeal before the Ld. CIT(A). The Ld.CIT(A) upheld the order for the Ld.AO. Aggrieved, the assessee has filed appeal before us.
The Ld.AR filed a compilation containing pages 1 to 30 which is kept in record. He argued that the assesse has received the interest from the following banks:-
(1) Saraswat Co-operative Bank Ltd Rs.1,57,614/- (2) Mumbai District Co-operative Bank Ltd Rs. 1,327/- (3) Shamrao Vithal Co-operative Bank Ltd Rs. 16,521/-
Total Rs. 1,75,462/- The Ld.AR stated that the interest as stated above are received from the investment in co-operative banks; so the assessee is eligible for deduction under section 80P(2)(d) of the Act.
We heard the rival submissions and considered the documents available on the record. It is argued that the issue is well settled by the Hon’ble Apex Court and by the ITAT, Mumbai Benches that a co-operative bank is co-operative society. So, the interest and dividend earned by the assessee from the co-operative bank is eligible for deduction under section 80P(2)(d) of the Act. The same issue was dealt by the co-ordinate bench of ITAT-Mumbai, F-Bench in the case of Jaimuni Sahkari Patpedhi Maryadit in to 334/Mum/2025 order dated 06/03/2025, wherein it has been held as follows:-
“6. We heard the rival submissions and considered the documents available on record. The only issue as agitated by the assessee society related to interest and dividend from co-operative banks which is claimed as deduction under section 80P(2)(d) of the Act. The Ld. CIT(A) in his order had referred the judgement of Hon’ble High Court of Gujarat in the matter of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd v. ACIT [2022] 140 taxmann.com 602 (Gujarat) wherein the deduction of 80P(2)(d) were not allowed to the appellant. The Ld. AR distinguished that inference drawn in the instant matter as compared to the matter relied upon by Ld.CIT(A) in pronouncement of his Order. In the matter of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd (supra) the facts were that the Appellant had received interest income from both Co-operative Banks as well as Nationalised Bank and the same was claimed as deduction u/s 80P(2)(d).Whereas in the instant case, the assessee has received interest only from Co operative Banks. Section 80P(2)(d) provides for deduction of interest received by a Co-operative Society from another Co-operative Society. A Co-operative Society being a Co-operative Society fits into the permissible provisions of the deductions. Thus the case referred by the Ld. CIT(A) in his judgement is not applicable or relatable to the facts of the instant case.
Valencia Towers C Wing Co-operative Housing Society Limited The Ld. AR argued that the two judgements passed by same Hon'ble Gujarat High Court in which the Ld. CIT(A) had relied on are distinguishable pertaining to the claim of deduction u/s 80P(2)(d).
The Ld. AR respectfully relied on the order of Hon’ble Gujrat High Court in PCIT v. Ashwinkumar Arban Co Operative Society Ltd [2024] 168 taxmann.com 314 (Gujarat) wherein the high court has allowed the deduction claimed by the appellant u/s 80P(2)(d) taking into consideration the judgement passed by Hon'ble Apex Court in the case of Kerala State Cooperative Agricultural and Rural Development Bank Ltd v. Assessing Officer [2023] 154 taxmann.com 305/295 Taxman 675/458 ITR 384 (SC). The relevant extract is as follows- "28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarofi Mandali Ltd. (supra) as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. In the matter of PCIT v. Shree Madhi Vighag Khand Udyog Sahakari Mandli Ltd [2025] 171 tomann.com 22 (Gujarat), wherein it was held that the appellant being a cooperative society, earning interest on investment made with a cooperative bank and claiming deduction under section 80P(2)(d), deduction was to be allowed under section 80P(2)(d).
8. Further the Ld. AR respectfully relied on the order of the Hon'ble Supreme Court in PCIT Vs Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited, Civil Appeal No. 8719/2022 dated 20/04/2023 it is held that, "…………Even otherwise, on merits also and taking into consideration the CBDT Circulars and even the definition of Bank under the Banking Regulation Act, the respondent/Assessee cannot be said to be Co-operative Bank/Bank and, therefore, Section 80(P)(4)shall not be applicable and that the respondent/Assessee shall be entitled to exemption/benefit under Section 80(P)(2) of the Income Tax Act."
Valencia Towers C Wing Co-operative Housing Society Limited The reliance was placed in the order of the Hon'ble Supreme Court in Kerala State Co- Operative Agricultural And Rural Development Bank Ltd. KSCARDB vs. Assessing Officer, [2023] 458 ITR 384 (SC), it has been held that, "15.14…………… Conclusion: In the instant case, although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949. In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the benefit of deduction under Section 80P of the Act."
The further reliance was placed on the following judgments of coordinate bench of ITAT which are as follows. i) (2014) 44 Taxmann.com 123 (Panaji Trib.) Tarani Mahila Co-op Credit Society Ltd. ii) (2014) 50 Taxmann.com 210 (Pune Trib) - MSEB Employees Co-op Cr Soc. Ltd iii) (2014) 59 Taxmann.com 97 (Bang Trib) Bagalkot District State Govt. Employees Co-op Credit Soc. Ltd. iv) (2014) 60 Taxmnn.com 163 (Hyderabad Trib)-Metrocity Criminal Courts Employees Mutually Aided Co-op. Credit Society v) (2014) 52 Taxmann.com 104 (Bang. Trib) Shree Laxmananda Multipurpose Co-op Soc. Ltd. vi)
(Assessment Year: 2013-14) Income Tax Officer Ward- 20(2)(2), Mumbai vs M/s. Mazgaon Dock Employees Co. Op. Credit Society Ltd dated 27.06.2018 vii) LT.A. No. 3048/Mum/2016 (Assessment Year: 2012-13) ITO 20(2)(2) vs M/s Mazgaon Dock Employees Co-op. Credit Society Ltd. dated 28/02/2018 Valencia Towers C Wing Co-operative Housing Society Limited viii)
Assessment Year 2017-18 & Assessment Year: 2020-21-Income Tax Officer-28.3.1, Mumbai vs Vaibhav Co-op Credit Society dated 29.05.2024 9. In our considered view the issue is well settled by the order of the Hon’ble Supreme Court. The revenue has restricted the claim of deduction U/s 80P(2)(d) in pursuance of section 80P(4) of the Act and the cooperative bank is not considered as cooperative society. Respectful reliance was placed on the order of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited (supra) and Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. KSCARDB (supra) where the Hon’ble Apex Court categorically stated that cooperative bank is the cooperative society and not acted as Bank under Banking Regulation Act,1949. We note the orders of the coordinate benches of ITAT who have taken same view in favour of the assessee. So, the interest earned from investment in cooperative bank is allowable deduction U/s 80P(2)(d) of the Act. The addition amount to Rs. 1,51,30,293/- is quashed.”
Accordingly, in our considered view, the order of the Coordinate Bench in Jaimuni Sahkari Patpedhi Maryadit (supra) is followed in adherence to judicial discipline. The disallowance of deduction under section 80P(2)(d) amounting to Rs.1,75,462/- is, therefore, held to be unjustified. The assessee is entitled to claim deduction under section 80P(2)(d) of the Act in respect of the interest income earned from co-operative banks. Hence, the grounds raised by the assessee are allowed.