Mayoor Co-Operative Housing Society Limited Vs Jurisdictional AO (ITAT Mumbai)
Interest Earned by Co-operative Housing Society From Co-operative Banks Eligible for Section 80P(2)(d) Deduction: Mumbai ITAT
The assessee, a co-operative housing society, claimed deduction under Section 80P(2)(d) in respect of interest earned on deposits maintained with co-operative banks. The AO and CIT(A) denied the deduction.
The Mumbai ITAT noted that the identical issue had already been decided in the assessee’s favour for AYs 2013-14 and 2021-22. In those years, the Tribunal had held that a co-operative bank remains a co-operative society carrying on banking business and, therefore, interest received from it qualifies for deduction under Section 80P(2)(d).
The Tribunal also referred to the Supreme Court’s decision in Mavilayi Service Co-operative Bank Ltd. and observed that the Revenue had not brought any distinguishing facts on record for the year under consideration.
Following its earlier orders in the assessee’s own case, the Tribunal directed the AO to allow the deduction under Section 80P(2)(d) on interest earned from co-operative banks.
List of Cases Discussed / Relied Upon
FULL TEXT OF THE ORDER OF ITAT MUMBAI
This appeal is filed by the assessee against the order of the learned CIT(A)-NFAC, Delhi, dated 15.01.2026 for the assessment year 2020-21 in denying deduction claimed u/s 80P(2)(d) of the Act.
2. Learned Counsel for the assessee, at the outset, submitted that the issue is squarely covered by the decision of the coordinate bench of the Tribunal in assessee’s own case in ITA No. 5416/Mum/2024, dated 24.02.2025, for the assessment year 2021- 22, a copy of which is placed on record. Learned Counsel for the assessee submitted that the very same issue has been decided in favour of the assessee by the coordinate bench of the Tribunal in assessee’s own case even for the assessment year 2013-14 in ITA No. 263/Mum/2018, dated 09.03.2018, and a copy of which is placed on record. Referring to paragraph 8 at page 4 of this decision, learned Counsel submitted that the Tribunal has set aside the order of the learned CIT(A) and directed the Assessing Officer to allow deduction for the interest earned from cooperative banks u/s 80P(2)(d) of the Act.
3. Learned Counsel for the assessee further submitted that the Tribunal, in its order for the assessment year 2021-22 in ITA No. 5416/Mum/2024, dated 24.02.2025 observed that, the Tribunal for the assessment year 2020-21, following the decision of the Hon’ble Supreme Court in the case of Mavilayi Services Cooperative Bank, reported in 431 ITR 1 (SC), allowed the deduction claimed by the assessee.
4. On the other hand, the learned DR placed reliance on the orders of the authorities below.
5. We have perused the orders of the authorities below and the Tribunal decisions placed before us. The only issue in the appeal of the assessee for adjudication before us is to whether the assessee is entitled for deduction u/s 80P(2)(d) on the interest income earned from cooperative banks.
6. We observed that the Tribunal for the assessment year 2021- 22 in assessee’s own case in ITA No. 5416/Mum/2024, vide order dated 24.02.2025, taking note of various decisions related to the disallowance u/s 80P(2)(d), held as under:
“2. During the hearing before the ITAT, the Ld. AR of the appellant has filed a copy of the ITAT Mumbai order in his own case for A.Y. 2013-14, where it was held that the appellant cooperative housing society is entitled for deduction u/s. 80P(2)(d) of the Act vide ITA No. 263/Mum/2018 dated 9.3.2018. From the copy of the order of the ITAT, it is observed that the issue is already decided in favour of the appellant vide above order in his own case. Apart from this, Ld. AR of the appellant has filed a legal paper book in which he relied on the decision rendered in his own case in A.Y. 2020-21, where the appellant society got relief and in this order, the coordinate Bench placed reliance of Hon’ble Supreme Court in the case of Mavilayi Services Cooperative Bank Ltd. (431 ITR 1) (SC). The appellant society placed reliance on the decisions of Coordinate Benches viz., PCIT Vs. Ashvin Kumar Arban Cooperative Society Ltd. (168 taxman.com 314), Kaliandas Udyog Bhavan Premises Cooperative Society Ltd. (ITA No. 6547/Mum/2017), Ashok Tower “D” Cooperative Housing Society Ltd. Vs. ITO (163 taxmann.com 598), Sai Ankur Cooperative Housing Society Vs. ITO (171 taxmann.com 44) and Mullanpur Garibdas Cooperative Multipurpose Society Vs. PCIT (163 Taxmann.com 598).
3. In all these decisions, including the decision of Hon’ble Supreme Court in the case of Mavilayi Services Cooperative Bank Limited Vs. Ld. (supra) and the decisions rendered in appellant’s own case in earlier years, facts and circumstances are similar and hence it was pleaded that the addition made by the Ld. AO by denying deduction u/s. 80P(2)(d) of the Act may be set aside.
4. Ld. DR relied on the orders of the lower authorities.
5. Heard both sides. In view of the several decisions mentioned above including that of Hon’ble Supreme Court decision and decision in appellant’s own case in earlier year, it is decided to delete the addition made by the Ld. AO relating to denial of the deduction u/s. 80P(2)(d) of the Act.”
7. Similarly, for the assessment year 2013-14, the Tribunal in assessee’s own case in ITA No. 263/Mum/2018, vide order dated 09.08.2018, following the decision of the coordinate bench of the Tribunal in the case of Citiscape Co-op. Housing Society Ltd. in ITA Nos. 5435 & 5436/Mum/2017, dated 08.12.2017, directed the Assessing Officer to allow deduction for interest earned from cooperative banks to the assessee u/s 80P(2)(d) of the Act, observing as under:
“5. The solitary issue urged in the appeal is whether the assessee is entitled for deduction u/s 80P(2)(d) of the Act in respect of interest earned from co- operative banks.
6. The facts in brief are that the assessee is a co-operative housing society. It derives income by way of subscription, service charges etc from members and interest income from savings and fixed deposits kept with various banks. The assessee claimed that the interest earned from co-operative banks is deductible u/s 80P(2)(d) of the Act. Since the provisions of sec. 80P(4) has withdrawn deduction u/s 80P to co- operative banks, the AO held that the assessee cannot avail deduction of interest earned on deposits with co- operative banks u/s 80P of the Act. The Ld. CIT(A) also confirmed the same.
7. We notice that an identical issue was considered in the case of M/s Citiscape Co-op Housing Society Ltd (ITA No.5435 & 5436/Mum/2017 dated 08-12-2017) and for the sake of convenience, we extract below the order passed in the above said case:-
2. The assessee is a co-operative housing society. It earned interest on deposits kept with Co-operative banks and claimed the interest income as exempt u/s 80P(2)(d) of the Act. Sec. 80P(2)(d) provides that the interest income or dividend derived by a co-operative society from its investments with any other co-operative society is deductible u/s 80P of the Act. The assessee took the view that the co-operative banks are basically co- operative societies and interest received from them qualifies for deduction u/s 80P(2)(d) of the Act. Accordingly it claimed deduction.3. The AO took the view that the income of co-operative banks is not deductible u/s 80P of the Act in terms of sec. 80P(4) of the Act and consequently the provisions of sec. 80P cannot be availed by the assessee in respect of income received from co-operative bank. Accordingly the AO reopened the assessments of both the years under consideration and rejected the claim for deduction u/s 80P(2)(d) of the Act in respect of interest income received from co-operative banks.
4. The Ld CIT(A) allowed the claim of the assessee in both the years by following the decision rendered by Hon’ble Karnataka High Court in the case of PCIT vs. Totagars Co-operative sale society (2017) (392 ITR 74), wherein the Hon’ble Karnataka High Court had held that the co- operative banks are co- operative societies. Aggrieved, the revenue has filed these appeals.
5. The Ld D.R submitted that the Hon’ble Karnataka High had delivered the decision reported in 392 ITR 74 on January 5, 2017. However, in its subsequent decision in the case of very same assessee, the Hon’ble Karnataka High Court has taken a different view, viz., in the case of The Principal CIT Vs. The Totagars Co-operative Sale Society (Income tax Appeal No.100066 of 2016 & others dated 16-06-2017). The Hon’ble Karnataka High Court has expressed the view that the interest income earned from co-operative banks is not different from the interest earned from Scheduled bank and hence clause (d) of Section 80P(2) of the Act would not apply to interest earned from deposits kept with co-operative bank.
6. On the contrary, the Ld A.R submitted that the fact that the cooperative banks are basically co-operative societies only cannot be denied. He submitted that the Hon’ble High Court of Himachal Pradesh has taken the view in the case of CIT Vs. Kangra Co-operative bank Ltd (2009) (309 ITR 106) that co-operative banks are cooperative societies and hence the interest income from investments made in any co-operative society would be entitled for deduction u/s 80P(2)(d) of the Act. He co-operative banks has been allowed by the SMC bench in the case of Murude Sahakari Parsanstha Maryadid (ITA No. 1058/Mum/2017 dated 21-08-2017) and by the division bench in the case of Lands End Co- operative Housing Society Ltd (ITA No.3566/Mum/2014 dated 15-01-2016).
7. I heard the parties and perused the record. I notice that the Hon’ble Karnataka High Court has initially taken the following view in the case of Totagars Co-operative Sale Society Ltd (392 ITR 74) “….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 Cooperative society Bank is merely a variety of theCo-operative Societies. Thus the Co-operative Bank which is a species of the genus would necessarily be covered by the word “Co- operative Society”…….
Admittedly, the interest which the assessee responded 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.”
8. However, the very same Hon’ble Karnataka High Court in the very same assessee’s case in ITA No. 100066 of 2016 & others dated 16-06- 2017 has taken the view that the interest income earned by a co- operative society from a co-operative bank is not deductible u/s 80P(2)(d) of the Act.
9. The Ld A.R has referred to me the decision rendered by Hon’ble Himachal Pradesh High Court in the case of Kangra co-operative bank Ltd (supra), wherein the High Court has observed as under:-
“…. Furthermore, the investments have been made in H.P. State Co- operative Bank which is also a co-operative society and therefore even under sec. 80P(2)(d) of the Act, interest income from investments made in any co-operative society would also be entitled for deduction.”
10. Thus, I notice that there are divergent views on this matter. The Hon’ble Karnataka High Court has expressed the view that the deduction u/s 80P(2)(d) would not be available in respect of interest income received from co-operative bank, whereas the Hon’ble Himachal Pradesh High Court has held that the said deduction would be available. The Hon’ble Supreme Court has held in the case of Vegetable Products Ltd (88 ITR 192) that if two reasonable constructions of a taxing provision are possible that construction which favours the assessee must be adopted. By applying the said principle, the view taken by Hon’ble Himachal Pradesh High Court, which is in favour of the assessee, is required to be adopted in this case. Accordingly I hold that the interest income earned by the assessee from Co-operative banks, which are basically co- operative societies carrying on banking business, is deductible u/s 80P(2)(d) of the Act. On this reasoning, I uphold the decision taken by Ld. CIT(A) in both the years on this issue.
8. Consistent with the view taken in the above said case, we set aside the order passed by Ld. CIT(A) and direct the AO to allow deduction to the interest earned from co-operative banks to the assessee u/s 80P(2)(d) of the Act.”
8. No distinguishing facts have been brought on record for this assessment year. Therefore, respectfully following the above decisions in assessee’s own case, we direct the Assessing Officer to allow the claim for deduction u/s 80P(2)(d) of the Act on the interest income earned by the assessee from cooperative banks.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 21/08/2026
