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Facts
The assessee, a co-operative housing society, claimed a deduction of Rs. 15,22,825/- under Section 80P(2)(d) for interest and dividend income earned from investments with co-operative banks. The AO and CIT(A) disallowed this, arguing that co-operative banks fall under Section 80P(4) which excludes them from such deductions. The assessee appealed, contending that the income is eligible for deduction as co-operative banks are still co-operative societies.
Held
The Tribunal held that, relying on Supreme Court and High Court judgments, a co-operative bank is considered a co-operative society for the purpose of allowing deductions under Section 80P(2)(d) to other co-operative societies investing in them. It noted that Section 80P(4) restricts deductions for co-operative banks themselves, but not for other co-operative societies investing in them. Therefore, the disallowance was unjustified, and the assessee is eligible for the deduction.
Key Issues
Whether interest and dividend 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, despite the provisions of Section 80P(4).
Sections Cited
2(19), 5(b), 56, 80P, 80P(2)(d), 80P(4), 80P(2)(a), 143(3), 250, 139(1), Chapter VIA
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Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Before: SHRI VIKRAM SINGH YADAV & SHRI ANIKESH BANERJEE
The instant appeal of the assessee was filed against the order of the Learned Commissioner of Income-tax (Appeal) ADDL / JCIT(A)-1, Noida [in short, ‘Ld.CIT(A)’]passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’)for A.Y. 2017-18, date of order 12/12/2024. The impugned order was 2 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd emanated from the order of the Learned Income-tax Officer 32(1)(7), Mumbai passed under section 143(3) of the Act, date of order 04/11/2019. 2. The assessee has raised the following grounds of appeal:-
“1. The Id C.I.T. (Appeals) erred in upholding the Order u/s 143 (3) dated 04/11/2019 disallowing a sum of Rs. 15,22,825/- r/off to Rs.15,22,825/ Rs.15,22,825/-disallowed consists of Interest Income derived from Co-operative Banks Rs. 15,22,764/- plus dividend received from co-operative bank Rs.61/- totaling in all to Rs.15,22,825/- without appreciating that Co-operative Banks are also registered under Maharashtra Co-operative Societies Act, 1960 and as such Interest Income derived by the Appellant is eligible for deduction U/s 80P(2)(d) of the Act and therefore disallowance ought to be deleted.
The Id C.I.T. (A) erred in not granting the relief U/s 80P(2)(d) despite the fact that the Society is eligible for Deduction under Chapter VIA r.w.s. 80AC of the Act insofar as the Return of Income was filed within the due date prescribed U/s 139(1) of the Act.
3. The Id CIT(A) has reproduced the observations of the AO in para 16 on page 5 of the order u/s 143(3) dated 04.11.2019 in Para 4.3 point no 16 of Page 3 of the order u/s 250 dated 12.12.2024 that the income claimed as a deduction was earned mainly from investments with co-operative banks 4. The Appellant craves leave to add, amend, alter, vary and/or rescind or withdraw any or all the above grounds of Appeal.”
The brief facts of the case is that the assessee is a co-operative housing society and filed the return by declaring gross total income NIL after claiming deduction amount to Rs.15,22,825/- under Chapter VIA related to section 80P(2)(d) of the Act. The details of interest earned form investment are as follows:- (1) Interest on savings bank account with Co-operative Bank, Shamrao Vithal co-operative Bank Ltd Rs. 46,396/- (2) Interest on savings bank account with Mumbai District Central Co-operative Bank Ltd Rs. 295/-
3 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd (3) Dividend from Mumbai District Central Co-operative Bank Ltd Rs.14,76,073/- (4) Divident from Cooperative Bank 61/- Total Interest earned Rs.15,22,825/- The Ld.AO disallowed the said claim of deduction for contravening provisions of section 80P(4) of the Act and the same was added back with total income. The aggrieved assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) upheld the view taken by the Ld.AO. Being aggrieved on the impugned appeal order, the assessee filed an appeal before us.
The Ld.AR filed a written submission containing pages 1 to 12 which is kept on the record. The Ld.AR argued that the issue is squarely covered by the order of the co-ordinate bench of ITAT, Mumbai and the order of the Hon’ble Apex Court. The relevant paragraphs of the submission of the Ld.AR are reproduced as below:- “3. Four judgements of the Hon'ble Tribunal have dealt with the issue of amendment to Section 80P(4) reproduced here under:
a. In the case of State Bank of India Employees Devangini Co-operative Housing Society Ltd 1.T.A.T. SMC bench in I. T. A. No. 3059/Mum 2022 dated 31.03.2023 while allowing the claim for deduction observed that:
Further, it is noted that though the co-operative banks pursuant to the insertion of sub-section (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a cooperative bank continues to be a co- operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the 4 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. b. In the case of Mittal Court Premises Co-op Society Ltd ITAT Mumbai Bench (ITA 1535 to 1537/Mum/2022) dated 31.10.2022 has also held that, we are unable to subscribe to the view that the aforesaid amendment to 80P(4) would jeopardise the claim of deduction of a co-operative society under Sec. 80P(2)(d) in respect of its interest income on investments/deposits parked with a co-operative bank. In our considered view, 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 under the aforesaid statutory provision, viz. Sec. 80P(2)(d) would be duly available. We find that the term "cooperative society" had been defined under Sec. 2(19) of the Act, as under:-
"(19) "Co-operative society" means a cooperative society registered under the Co- operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any state for the registration of co-operative societies;"
We are of the considered view, that though the co-operative banks pursuant to the insertion of subsection (4) to Sec. 80P would no more be entitled for claim of deduction under Sec. 80P of the Act, but as a co-operative bank continues to be a co-operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other law for the time being in force in any State for the registration of co-operative societies, therefore, the interest income derived by a co-operative society from its investments held with a co-operative bank would be entitled for claim of deduction under Sec.80P(2)(d) of the Act. c. ITAT D Bench Mumbai in case of The Bombay Catholic Co-operative Housing Society Ltd in ITA/1183/Mum/2022 relying on the judgement of Hon'ble Kerala High Court in the case of PCIT vs Peroorkada Service Co. Bank Ltd (2022) 442 ITR 141 (Kerala) dated 01.11.2021 and also relying on the judgement of Hon'ble
5 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd Karnataka High Court in the case of PCIT vs Totagars Co-operative sale Society (2017) 392 ITR 74 (Kar.) dated 05th Jan 2017 have held that if co-operative society or a credit co-operative society has interest on investments or deposits with co-operative banks, the same is allowable as a deduction u/s 80P(2)(d). Placing reliance on the above judgements accordingly the order of the Ld. First Appellate Authority allowing deduction u/s 80P(2)(d) is confirmed and the grounds by the revenue are dismissed. d. In the case of Palm Court Co-operative Housing Society (CHS) ITAT Mumbai bench (ITA 561/MUM/2021) held that interest from investments made in co- operative banks would be exempt in the hands of the housing Society.
The ITAT bench further placed reliance on the earlier decisions of the Mumbai bench of the Tribunal wherein it has been held that a Co-operative Bank continues to be a Co-operative Society under the Co-operative Societies Act, 1960 therefore the interest income derived by a CHS from its investments with a co- operative bank would be entitled to deduction.”
The Ld.DR argued and stated that the co-operative bank is not considered as co-operative society. So there was contravention of provisions of section 80P(4) of the Act, the deduction under section 80P(2)(d) was duly rejected. The Ld.DR invited our attention in impugned appellate order paragraphs 4.3 and 4.4 which are reproduced as below:-
4.3. The relevant observations made by the A.O. are as below:
“……… the co-operative banks wherefrom the interest income is earned during the year are not co-operative banks covered within the meaning of section 80 P(4) of the IT. Act
6 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd only interest earned from investment made by co-operative society in another in co- operative society will only qualify for deduction in terms of provisions of section u/s 80 P(2)(d) of the Act. The assessee in the present scenario claiming the amount of Rs. 15,22.825/- as a deduction by arguing that the interest eamed by it is from investments in a co-operative bank...
…………11. This argument of the assessee is not acceptable, especially in view of the provisions of 80P(4) inserted by the Finance Act 2006 w.e.f. 01/04/2007, which specifically excludes co-operative banks from the definition of co operative societies. What Section 80P (2)(d) of the Act, envisages is that such interest or dividend earned by an assessee co-operative society should be out of the investments with any other co-operative society. The words Co-operative Banks' are missing in clause (d) of subsection (2) of Section 80P of the Act. Even though a co-operative bank may have the corporate body or skeleton of a co-operative society but its business is entirely different and that is banking business, which is governed and regulated by the provisions of the Banking Regulation Act, 1949 Only the Primary Agricultural Credit Societies with their limited work of providing credit facility to its members continued to be governed by the ambit and scope of deduction under Section 60P of the Act
……….15. From the various judicial decisions rendered from time to time, it becomes amply clear that for getting 100% deduction from the section 80 P(2)(d) of the IT. Act, the income claimed to be exempt, including interest income, should be in the nature of business income and should be in the nature of any income as mentioned in the provisions of section 80P(2)(a) of the IT Act. However in the case of assessee, it is a residential co-operative society earning interest income out of the surplus funds invested in the co-operative bank and their activities does not fall under any activities mentioned in section 80P(2) and hence same is not eligible for deduction in terms of provisions of section 80P(2) of the IT Act...
…………16 Further, the interest income claimed as deduction U/s 80 P (2)(d) was earned mainly from investment made in co-operative bank, which is not a co-
7 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd operative society referred to in section 80P(4) of the IT Act. It may be stated that the Hon'ble Supreme Court in its decision in the case Citizen Co-operative Society Ltd Vs. Assistant Commissioner of Income-tax, Circle-9(1), Hyderabad 84 Taxmann.com 114 (2017) has specifically held that co-operative banks are not co-operative societies as they are catering to needs of general public also apart from the members of its own and denied deduction under 80P to such banks. Thus, whether a Co-operative Bank is a Co-operative Society or not is a settled issue as per this decision of the Hon'ble Supreme Court. This decision of Hon'ble Supreme Court is squarely applicable to the facts of the assessee's case also. Interest earned by the assessee housing society is from surplus funds invested in co-operative bank which is not a cooperative society referred to in section 80 P(4) of the I.T. Act. Therefore, the assessee is not entitled for the deduction u/s 80 P(2)(d) of the Act."
4.4. The observations made by the A.O. have been thoroughly perused and it is apparent that the contentions of the appellant do not find any merit. The term 'co- operative society' has been defined u/s 80P of the Act and in order to claim the deduction the necessary requisites have been outlined as well. Since, a co-operative bank does not fall under the ambit of co-operative society, the deduction claimed by the appellant cannot be allowed. The disallowance made by the A.O. is confirmed.”
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 in the nature of 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:-
8 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd “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. The Ld. AR argued that the two judgements passed by same Hon'ble Gujarat High Court in which the Ld. CIT(A) had relied onare distinguishable pertaining to the claim of deduction u/s 80P(2)(d).
7. The Ld. AR respectfully relied on the order of Hon’ble Gujrat High Court inPCIT 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 9 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd 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).
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." 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."
8. 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
10 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society 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 viii) ITA No.62/MUM/2024 Assessment Year 2017-18 & ITA No. 165/MUM/2024 Assessment Year: 2020-21-Income Tax Officer-28.3.1, Mumbai vs Vaibhav Co-op Credit Society dated 29.05.2024
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 ITATwho 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 disallowance of deduction under section 80P(2)(d) amount to Rs.15,22,825/- is unjustified and the assessee is 11 ITA 1784/Mum/2025 Yudhishtir co-operative Housing Society Ltd eligible for deduction under section 80P(2)(d) of the Act related to interest and dividend earned from co-operative bank. The assessee succeeds in its grounds. 6. In the result, the appeal of the assessee bearing is allowed. Order pronounced in the open court on 25th day of April, 2025. Sd/- sd/- (VIKRAM SINGH YADAV) (ANIKESH BANERJEE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai,दिन ांक/Dated: 25/04/2025 Pavanan