Income Tax | ITAT Mumbai Allows Section 80P Deduction On Interest Earned From Co-operative Banks

A Bench comprising Vikram Singh Yadav (Accountant Member) and Rahul Chaudhary (Judicial Member) allowed the appeal filed by the assessee, Clover Everest World Co-operative Housing Society Ltd. and set aside the denial of deduction by the tax authorities for Assessment Year 2021–22 .

The assessee, Clover Everest World Co-operative Housing Society Ltd. a co-operative housing society based in Thane, had earned interest income of about ₹3.62 lakh from deposits placed with Punjab and Maharashtra Co-operative Bank and Thane District Central Co-operative Bank.

The assessee claimed deduction on this income under Section 80P(2)(d), which provides tax exemption on interest or dividend income earned by a co-operative society from investments made with another co-operative society.

However, the Centralised Processing Centre (CPC) denied the deduction while processing the return under Section 143(1). The rectification application filed by the assessee was also rejected, and the Commissioner of Income Tax (Appeals) upheld the disallowance.

Allowing the appeal, the Bench held that Section 80P(2)(d) requires only two conditions to be satisfied i.e. the income should be interest or dividend income; and such income should be derived from investments made with another co-operative society.

The Bench noted that co-operative banks continue to be registered as co-operative societies under the relevant co-operative laws. Therefore, interest earned by a co-operative housing society from deposits placed with co-operative banks qualifies for deduction under Section 80P(2)(d).

Relying on the Supreme Court's ruling in Mavilayi Co-operative Bank Civil Appeal 7343-7350 of 2019, the Bench reiterated that Section 80P is a beneficial provision meant to promote the co-operative sector and must be interpreted liberally in favour of the assessee.

The Bench also observed that the issue is no longer res integra and is covered by several earlier decisions of Co-ordinate Benches, including rulings of the Mumbai ITAT, which have consistently held that interest income earned from co-operative banks is eligible for deduction under Section 80P(2)(d).

Further the bench also relied on the decisions of Co-ordinate Benches of ITAT including Nariman Bhavan Premises Co-operative Society Ltd. (ITAT Mumbai) (ITA No. 3658/Mum/2023), wherein it was held that Interest income earned by a co-operative housing/premises society from deposits placed with co-operative banks is fully eligible for deduction under Section 80P(2)(d) of the Income Tax Act.

In view of the above, the ITAT allowed the appeal of the assessee and directed the Assessing Officer to allow the deduction claimed by the assessee and delete the addition of ₹3.62 lakh.

Case Title: Clover Everest World Co-operative Housing Society Limited Vs. ITO Ward-1(1)

Case No.: ITA No. 6376/Mum/2025

Appearance for Assessee: Shri Ruturaj Gurjar

Appearance for Revenue: Shri Mahesh Shingate , Addl. CIT