Pune ITAT Allows U/s 80P(2)(d) Deduction on Interest from Co-operative Banks to Housing Society

Shiv Ki Jai Co-operative Housing Society Vs ITO (ITAT Pune)

Pune ITAT Allows U/s 80P(2)(d) Deduction on Interest from Co-operative Banks to Housing Society

Summary: The Pune ITAT allowed the assessee’s appeal and directed the Assessing Officer to allow deduction under Section 80P(2)(d) of the Income-tax Act on interest earned from deposits with co-operative banks. The assessee, a co-operative housing society, had claimed the deduction in its return for AY 2021-22, but the claim was denied while processing the return under Section 143(1), and the denial was upheld by the CIT(A). The Tribunal considered its earlier decision in ITO Ward-5, Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, which had followed several coordinate bench decisions and referred to the Bombay High Court decision in Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd. and the Supreme Court’s order affirming that position. Following those judicial precedents, the Tribunal set aside the CIT(A)’s order on the disputed issue and directed the Assessing Officer to grant deduction under Section 80P(2)(d) in respect of interest on deposits with co-operative banks. Accordingly, the assessee’s appeal was allowed.

The Pune ITAT allowed the appeal of a co-operative housing society and held that interest earned on deposits with co-operative banks is eligible for deduction u/s 80P(2)(d). The CPC, while processing the return u/s 143(1), had denied the deduction and the CIT(A) upheld the adjustment by holding that interest received from co-operative banks did not qualify for deduction u/s 80P(2)(d).

The Tribunal noted that the issue was no longer res integra in view of its earlier decision in ITO v. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, wherein, after considering the decisions of the Bombay High Court and the Supreme Court, it was held that interest and dividend income earned from investments with co-operative banks, which are themselves co-operative societies, qualifies for deduction u/s 80P(2)(d). The Tribunal also referred to the Supreme Court’s decision affirming that a co-operative credit society cannot be equated with a co-operative bank merely because it provides credit facilities to its members.

Following the binding judicial precedents, the ITAT held that the assessee was entitled to deduction u/s 80P(2)(d) in respect of interest earned on deposits with co-operative banks. Accordingly, the Tribunal set aside the order of the CIT(A) and directed the AO to allow the deduction u/s 80P(2)(d). The assessee’s appeal was allowed.

Cases Discussed:

• Shiv Ki Jai Co-operative Housing Society Vs ITO (ITAT Pune)
• ITO Ward.-5, Sangli Vs. Shree Ganesh Nagari Sahakari Pat Sanstha Maryadit, ITA No. 2375/PUN/2025 & C.O. No. 49/PUN/2025
• Gurudatta Gramin Bigersheti, ITA No. 502/PUN/2025, order dated 28-07-2025
• Pune Jila Madhyawarti Sahkari Bank Sevakanchi Sahkari Patsanstha Maryadit, ITA No. 1086/PUN/2025, order dated 23-06-2025
• Sharadchandra Nagari Sahakari Patsanstha Maryadit, ITA No. 1041/PUN/2025, order dated 04-06-2025
• Civil Appeal No. 8719 of 2022, order dated April 20, 2023
• Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 taxmann.com 161/279 Taxman 75/431 ITR 1/[2021] 7 SCC 90
• Annasaheb Patil Mathadi Kamgar Sahkari Pathpedhi Ltd., ITA No. 933/2017, order dated 14-10-2019
• Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113/232 Taxman 510/377 ITR 272 (Bom.)

FULL TEXT OF THE ORDER OF ITAT PUNE

The assessee has filed an appeal against the order of Addl/JCIT(A), Kolkata passed u/sec 250 of the Income Tax Act. The assessee has raised the grounds of appeal challenging the order of the JCIT(A) sustaining the denial of claim of deduction of interest on deposits with cooperative banks u/sec 80P(2)(d) of the Act made by the Assessing Officer.

2. The brief facts of the case are that, the assessee is a co operative society The assessee has filed the return of income for the A.Y. 2021-22 on 15.03.2022 disclosing a total income of Rs. 46,590/- after claiming deduction u/sec 80P of the Act and the return of income was processed u/sec 143(1) of the Act with denial of interest on deposits with cooperative banks u/sec 80P(2)(d) of the Act and determined the total income of Rs. 14,27,122/- vide order u/sec.143(1) of the Income Tax Act dated 19.10.2022.

3. Aggrieved by the order, the assessee has filed the appeal with the CIT(A), whereas the CIT(A) has considered the grounds of appeal, submissions of assessee, finding of the Assessing Officer but has sustained the action of the CPC/AO that the interest income earned by the assessee from the Co-operative Banks is not eligible for deduction u/sec 80P(2)(d) of the Act and dismissed the assessee’s appeal. Aggrieved by the order of the CIT(A), the assessee has filed the appeal before the Hon’ble Tribunal. And none appeared on behalf of the assesse.

4. We heard the Ld. DR submissions and perused the material on record. The assessee in the grounds of appeal mentioned that the CIT(A) has erred in observing that the interest income from the cooperative Bank is ineligible for deduction u/s.80P(2)(d) of the Act. Whereas the Hon’ble Tribunal in the revenue appeal ITO Ward.-5,Sangli Vs. Shree Ganesh NagariSahakari Pat SansthaMaryadit (ITA No.2375/PUN/2025 & C.O. No.49/PUN/2025) has dealt and held as under:

“15. We have heard Ld. Counsels from both the sides and perused the material available on record. In this regard, we find that all the grounds raised by the Revenue revolves around the issue of allowability of deduction u/s 80P(2)(d) of the IT Act to primary credit cooperative society. In this regard, we find that in number of decisions passed by coordinate benches of this Tribunal it has been held that a primary credit cooperative society is eligible to claim deduction u/s 80P(2) of the IT Act on interest and dividend income earned from its investment with other cooperative banks which are also cooperative societies duly registered under Maharashtra State Cooperative Societies Act. In this regard, following decisions are relevant :-

(i) GurudattaGraminBigersheti, ITA No.502/PUN/2025 order dated 28-07-2025.

(ii) PuneJilaMadhyawartiSahkariBankSevakanchiSahkariPatsa nsthaMaryadit, ITA No.1086/PUN/2025 order dated 23-06-2025.

(iii) SharadchandraNagariSahakariPatsansthaMaryadit, ITA No.1041/PUN/2025 order dated 04-06-2025.

16. We further find that the core issue of allowance of deduction u/s 80P(2) of the IT Act to a primary credit cooperative society was also decided by Hon’ble Jurisdictional Bombay High Court in the case of Anna sahebPatilMathadiKamgarSahkari Path pedhi Ltd.in ITANo.933/2017 order dated 14-10-2019 wherein deduction u/s 80P(2) of the IT Act was allowed to a primary credit cooperative society. Subsequently, this Judgement was also approved by Hon’ble Supreme Court in Civil Appeal No.8719 of 2022 order dated April 20, 2023 by observing as under :-

“1. Feeling aggrieved and dissatisfied with the impugned order dated 14-10-2019 passed by the High Court of Judicature at Bombay in ITA No. 933/2017, by which the High Court has dismissed the said appeal preferred by the Revenue, relying upon its earlier decision in the case of Quepem Urban Co-operative Credit Society Ltd. v. Asstt. CIT [2015] 58 taxmann.com 113/232 Taxman 510/377 ITR 272 (Bom.), the Revenue has preferred the present appeal.

2. The High Court considered the following question of law –

“Whether on the facts and in the circumstances of the case and in law, the Tribunal is justified as claimed by the assessee on the ground that the assessee, a co-operative credit society and is not a bank for the purpose of Section 80P(4) of the Act?”

3. Apart from the fact that against the relied upon decision in the case of M/s. Quepem Urban Co-operative Credit Society Ltd. (supra),the Special Leave Petition has been dismissed, having heard learned counsel appearing on behalf of the respective parties, the issue involved in the present appeal is squarely covered against the Revenue in view of the decision of this Court in Mavilayi Service Co-operative Bank Ltd. v. CIT [2021] 123 com161/279 Taxman 75/431 ITR 1/[2021] 7 SCC 90. This Court, in the aforesaid decision has specifically observed and held that primary Agricultural Credit Societies cannot be termed as Co-operative Banks under the Banking Regulation Act and, therefore, such credit societies shall be entitled to exemption under section 80(P)(2) of the Income-tax Act, 1961.

4. Ms. AakanshaKaul, learned counsel appearing on behalf of the appellant/Revenue has tried to submit that the respondent/Assessee will fall under the definition of Co-operative Bank as their activity is to give credit/loan. However, it is required to be noted that merely giving credit to its members only cannot be said to be the Co-operative Banks/Banks under the Banking Regulation Act. The banking activities under the Banking Regulation Act are altogether different activities. There is a vast difference between the credit societies giving credit to their own members only and the Banks providing banking services including the credit to the public at large also.

5. There are concurrent findings recorded by CITA, ITAT and the High Court that the respondent/Assessee cannot be termed as Banks/Cooperative Banks and that being a credit society, they are entitled to exemption under section 80(P)(2) of the Income-tax Act. Such finding of fact is not required to be interfered with by this Court in exercise of powers under Article 136 of the Constitution of India. 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.

6. In view of the above and for the reasons stated hereinabove, the present appeal deserves to be dismissed and is accordingly dismissed, answering the question against the Revenue and in favour of the Assessee.”

17. Respectfully following the above latest decision passed by Hon’ble Supreme Court cited supra, we are of the considered opinion that the issue of allowance of deduction u/s 80P(2) of the IT Act in favour of primary credit cooperative society has attained finality & therefore we do not find any error in the order passed by Ld. CIT(A)/NFAC with regard to allowance of deduction u/s 80P(2)(d) of the IT Act to the assessee on interest income earned from its investment from cooperative banks which are also cooperative societies.

18. In the result, the appeal filed by the Revenue is dismissed.

19. To sum up, the appeal filed by the Revenue is dismissed and the cross objection filed by the assessee is partly allowed, as indicated above.”

5. We considering the facts, circumstances and ratio of the judicial decisions dealt above and follow the judicial precedence. Accordingly, we set aside the order of the CIT(A) on this disputed issue and direct the Assessing Officer to allow the deduction u/sec.80P2(d) of the Act in respect of interest on deposits earned from the cooperative banks. And the grounds of appeal of the assessee are allowed in favour of the assessee.

6. In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 10^th July, 2026.