Income Tax Appellate Tribunal Recognizes Co-operative Banks as Co-operative Societies, Allowing Deductions Under Section 80P(2)(d)
In a significant judgment, the Income Tax Appellate Tribunal (ITAT), Mumbai "SMC" Bench, has ruled in favor of Clover Everest World Co-operative Housing Society Limited, allowing it to claim a deduction under Section 80P(2)(d) of the Income Tax Act, 1961. The decision, dated December 12, 2025, overturns the previous orders of the Additional Commissioner of Income Tax (ACIT) and the Centralized Processing Center (CPC), which had denied the deduction on interest income earned from deposits with Punjab and Maharashtra Co-operative Bank and Thane District Central Co-operative Bank.
The tribunal's ruling is based on the interpretation of Section 80P(2)(d), which allows a deduction for income derived by a Co-operative Society from investments with other Co-operative Societies. The court emphasized that Co-operative Banks qualify as Co-operative Societies under the Co-operative Societies Act, thus making them eligible for such deductions.
The crux of the case revolved around the interpretation of tax provisions favoring Co-operative Societies. The tribunal noted that Section 80P is a benevolent provision aimed at promoting the co-operative sector, and should be interpreted liberally. The decision aligns with several precedents where similar deductions have been upheld, including judgments by the Bombay and Gujarat High Courts, strengthening the position of Co-operative Societies in claiming deductions on interest income from Co-operative Banks.
The tribunal's decision is a significant victory for Clover Everest World Co-operative Housing Society Limited, which had faced denial of its deduction claim amounting to Rs. 362,297. The society's appeal was represented by Shri Ruturaj Gurjar, while the revenue was represented by Shri Mahesh Shingate, Addl. CIT.
The ruling is expected to impact numerous Co-operative Societies across India, affirming their right to claim deductions on interest income from Co-operative Banks, and potentially encouraging more societies to engage in financial transactions with Co-operative Banks, thereby strengthening the co-operative sector.
Bottom Line:
Deduction under Section 80P(2)(d) of the Income Tax Act, 1961 can be claimed by a Co-operative Society on interest income earned from deposits with Co-operative Banks, as Co-operative Banks qualify as Co-operative Societies under the Act.
Statutory provision(s): Section 80P(2)(d) of the Income Tax Act, 1961
