IN THE INCOME TAX APPELLATE TRIBUNAL

“H”(SMC) BENCH, MUMBAI

BEFORE SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER

SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER

ITA No. 11/MUM/2025

Assessment Year : 2019-20

The Suvarna Nagar Co-operative Hsg.

Society Ltd.
Jai Hind Cub Building JVPD Scheme,
2nd Floor, N.S.Road, Vile Parle West,
Mumbai-400057. ……………. Appellant
PAN: AAAAS 4938 E

v/s

Asst. Director, Centralized Processing

Centre/
ITO, Ward-34(3)(5), Kotilya Bhavan,
Bandra Kurla Complex, ……………. Respondent
Bandra, Mumbai

Assessee by : Ms. Parvathy Ganesh, CA

Revenue by : Shri Pravin Salunkhe, Sr. DR

Date of Hearing – 11/02/2025 Date of Order – 14/02/2025

ORDER

PER SANDEEP SINGH KARHAIL, J.M.

The assessee has filed the present appeal against the impugned order

dated 06/12/2024, passed under section 250 of the Income Tax Act, 1961

(“the Act”) by the learned Additional/Joint Commissioner of Income Tax

(Appeals)–2, Noida [“learned Addl./Joint CIT(A)”], for the assessment year

2019-20.
 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 2

2. In this appeal, the assessee has raised the following ground: –

1. The learned Commissioner of Income Tax (Appeals) erred in

confirming the Order of the Asst. Director making addition of
Rs. 24,69,242/- by disallowing the deduction u/s 80P (2)(d)
and 80P(2)(d) of the Act.

2. The assessee craves leave to add, alter or modify the grounds

of appeal and submit a detailed statement of facts, written
submissions and case law relied upon at the time of the
hearing.

3. The sole grievance of the assessee is against the denial of deduction

claimed under section 80P(2)(c) section 80P(2)(d) of the Act on the interest

income earned on saving accounts and fixed deposits maintained with Co-

operative Banks.

4. The brief facts of the case are that the assessee is a co-operative

housing society duly registered under the Maharashtra State Co-operative

Society Act. For the year under consideration, the assessee filed its return of

income on 01/10/2019, declaring a total income of INR 4,24,090. The return

filed by the assessee was processed vide intimation dated 06/03/2020

issued under section 143(1) of the Act, determining the total income of the

assessee at INR 28,93,330 after disallowing the deduction of INR 24,19,242

claimed under section 80P(2)(d) of the Act and deduction of INR 50,000

claimed under section 80P(2)(c) of the Act. The learned Addl./Joint CIT(A),

vide impugned order, dismissed the appeal filed by the assessee and upheld

the disallowance of deduction claimed under section 80P(2)(c)and section

80P(2)(d) of the Act on the basis that the interest earned from the Co-

operative Banks do not qualify for deduction under section 80P(2)(d) of the

Act. Further, the learned Addl./Joint CIT(A) also denied the deduction
 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 3

claimed under section 80P(2)(c) of the Act on the basis that the provision is

applicable to co-operative societies engaged in activities other than those

specified in sub-section (2) of section 80P of the Act and the assessee is a

co-operative housing society, which does not fall within the ambit of section

80P(2)(c) of the Act. Being aggrieved, the assessee is in appeal before us.

5. We have considered the submissions of both sides and perused the

material available on record. In the present case, the assessee is a co-

operative housing society. During the year under consideration, the

assessee earned interest income from saving accounts and fixed deposits

maintained with the Co-operative Banks, which was recognised as income of

the society. Thus, during the year under consideration, the assessee earned

interest income of INR 24,19,242 from its deposits maintained with the Co-

operative Banks, and the same was claimed as a deduction under section

80P(2)(d) of the Act, which was denied by the lower authorities. Further, the

assessee claimed standard deduction of INR 50,000 under section 80P(2)(c)

of the Act, which was also denied to the assessee.

6. We find that while deciding the issue pertaining to the claim of

deduction under section 80P(2)(d) of the Act with respect to the interest

income earned from investment with Co-operative Bank, the coordinate

bench of the Tribunal in Pathare Prabhu Co–operative Housing Society v/s

ITO, (2023) 202 ITD 464 (Mum-Trib), held that interest income is eligible

for deduction under section 80P(2)(d) of the Act. The relevant findings of

the coordinate bench, in the aforesaid decision, are reproduced as follows: –

 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 4

“8. We have considered the submissions of both sides and perused

the material available on record. The only dispute raised by the
assessee is against the disallowance of deduction under section
80P(2)(d) of the Act in respect of interest income received from the
Co-operative Banks. The assessee is a registered Co-operative
Housing Society and during the assessment year 2018-19 earned
interest income of Rs. 50,39,861 from the investments made in
various Co-operative Banks.

9. Before proceeding further, it is relevant to note the provisions of

section 80P of the Act under which the assessee has claimed the
deduction in the present case. As per the provisions of section 80P(1)
of the Act, the income referred to in sub-section (2) to section 80P
shall be allowed as a deduction to an assessee being a Co-operative
Society. Further, section 80P(2)(d) of the Act, reads as under:

"80P. Deduction in respect of income of co-operative societies.

(1) ** ** **

(2) The sums referred to in sub-section (1) shall be the

following, namely:-
(a) to (c) ** ** **

(d) in respect of any income by way of interest or dividends

derived by the co-operative society from its investments with
any other co-operative society, the whole of such income;"

10. Thus, for the purpose of provisions of section 80P(2)(d) of the

Act, two conditions are required to be cumulatively satisfied- (i)
income by way of interest or dividend is earned by the Co-operative
Society from the investments, and (ii) such investments should be
with any other Co-operative Society. Further, the term “co-operative
society” is defined under section 2(19) of the Act as under:

"(19) "co-operative society" means 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 ;"

11. In the present case, there is no dispute that the assessee is a Co-
Operative Housing Society. Thus, if any income as referred to in sub-
section (2) to section 80P of the Act is included in the gross total
income of the assessee, the same shall be allowed as a deduction. It
is pertinent to note that since the assessee is registered under the
Maharashtra Co-operative Societies Act, 1960, it is required to invest
or deposit its funds in one of the modes provided in section 70 of the
aforesaid Act, which includes investment or deposit of funds in the
District Central Co-operative Bank or the State Co-operative Bank.
Accordingly, the assessee kept the deposits in Co-operative Banks
registered under the Maharashtra Co-operative Societies Act and
earned interest, which was claimed as a deduction under section
80P(2)(d) of the Act. The AO denied the deduction under section
80P(2)(d) of the Act on the basis that the Co-operative Bank is
 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 5

covered under the provisions of section 80P(4) of the Act. We find

that the Hon’ble Supreme Court in Mavilayi Service Co-operative
Bank Ltd. v. CIT [2021] 123 taxmann.com 161/279 Taxman 75/431
ITR 1 while analysing the provisions of section 80P(4) of the Act held
that section 80P(4) is a proviso to the main provision contained in
section 80P(1) and (2) and excludes only Co-operative Banks, which
are Co-operative Societies and also possesses a licence from RBI to
do banking business. The Hon'ble Supreme Court further held that
the limited object of section 80P(4) is to exclude Co-operative Banks
that function at par with other commercial banks i.e. which lend
money to members of the public. Thus, we are of the considered view
that section 80P(4) of the Act is of relevance only in a case where the
assessee, who is a Co-operative Bank, claims a deduction under
section 80P of the Act which is not the facts of the present case.
Therefore, we find no merits in the aforesaid reasoning adopted by
the AO and upheld by the learned CIT(A) in denying deduction under
section 80P(2)(d) of the Act to the assessee.

12. As regards the claim of deduction under section 80P(2)(d) of the

Act, it is also pertinent to note that all Co-operative Banks are Co-
operative Societies but vice versa is not true. We find that the
coordinate benches of the Tribunal have consistently taken a view in
favour of the assessee and held that even the interest earned from
the Co-operative Banks is allowable as a deduction under section
80P(2)(d) of the Act. In Kaliandas Udyag Bhavan Premises Co-op
Society Ltd. v. ITO [2018] 94 taxmann.com 15 (Mum.)/[ITA No.
6547/Mum./2017, dated 25-4-2018], while dealing with the
provisions of section 80P(2)(d) vis-à-vis section 80P(4) of the Act,
the coordinate bench of the Tribunal observed as under:

"7. ……Thus, from a perusal of the aforesaid sec. 80P(2)(d) it

can safely be gathered that income by way of interest income
derived by an assessee co-operative society from its
investments held with any other cooperative society, shall be
deducted in computing the total income of the assessee. We
may herein observe, that what is relevant for claim of
deduction under sec. 80P(2)(d) is that the interest income
should have been derived from the investments made by the
assessee co-operative society with any other cooperative
society. We though are in agreement with the observations of
the lower authorities that with the insertion of sub-section (4)
of sec. 80P, vide the Finance Act, 2006, with effect from 1-4-
2007, the provisions of sec. 80P would no more be applicable
in relation to any co-operative bank, other than a primary
agricultural credit society or a primary co-operative agricultural
and rural development bank, but however, are unable to
subscribe to their view that the same shall also jeopardise the
claim of deduction of a co-operative society under sec.
80P(2)(d) in respect of the interest income on their
investments parked with a co-operative bank. We have given a
thoughtful consideration to the issue before us and are of the
considered view that as long as it is proved that the interest
income is being derived by a co-operative society from its
 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 6

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 may herein observe
that the term 'co-operative 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

bank pursuant to the insertion of Sub-section (4) of sec. 80P
would no more be entitled for claim of deduction under sec.
80P of the Act, but however, 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 enforced 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."

13. We find that the learned CIT(A) has placed reliance upon the
decision of the Hon'ble Karnataka High Court in Pr. CIT v. Totagars
Co-operative Sales Society [2017] 83 taxmann.com 140/395 ITR
611, wherein it was held that interest earned by the assessee, a Co-
operative Society, from surplus deposits kept with a Co-operative
Bank, was not eligible for deduction under section 80P(2)(d) of the
Act. We find that in an earlier decision the Hon'ble Karnataka High
Court in Pr. CIT v. Totagars Co-operative Sale Society [2017] 78
taxmann.com 169/392 ITR 74 held that according to section
80P(2)(d) of the Act, the amount of interest earned from a Co-
operative Society Bank would be deductable from the gross income of
the Co-operative Society in order to assess its total income. Thus,
there are divergent views of the same Hon'ble High Court on the
issue of eligibility of deduction under section 80P(2)(d) of the Act in
respect of interest earned from Co-operative Bank. No decision of the
Hon'ble jurisdictional High Court was brought to our notice on this
aspect. We have to, with our highest respect to both the views of the
Hon'ble High Court, adopt an objective criterion for deciding as to
which decision of the Hon'ble High Court should be followed by us.
We find guidance from the judgment of the Hon'ble Supreme Court in
CIT v. Vegetable Products Ltd. [1973] 88 ITR 192. In the aforesaid
decision, the Hon'ble Supreme Court has laid down a principle that "if
two reasonable constructions of a taxing provisions are possible, that
construction which favours the assessee must be adopted".

14. Therefore, in view of the above, we uphold the plea of the

assessee and direct the AO to grant the deduction under section
80P(2)(d) of the Act to the assessee in respect of interest income
earned from investment with Co-operative Banks. Accordingly, we set
aside the impugned order passed by the learned CIT(A) for the
 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 7

assessment year 2018-19. As a result, grounds raised by the

assessee are allowed.”

7. We find that the decision of the Hon’ble Supreme Court in Citizen Co-

operative Society Ltd. v/s ACIT, reported in [2017] 397 ITR 1 (SC), relied

upon in the impugned order, is not applicable to the facts of the present

case as the Hon’ble Supreme Court was examining the issue whether a

taxpayer, who is a co-operative credit society, is entitled to claim deduction

under section 80P(2)(a)(i) of the Act when the society was carrying on the

banking business for public at large instead of carry on business of banking

or providing credit facilities to its members. However, in the present case,

the issue under consideration before us pertains to the claim of deduction

under section 80P(2)(d) of the Act on the interest income earned on saving

accounts and fixed deposits maintained with Co-operative Banks.

8. Therefore, respectfully following the decision of the coordinate bench

of the cited supra, we direct the AO to grant a deduction under section

80P(2)(d) of the Act to the assessee in respect of the interest income earned

from deposits made with the Co-operative Banks.

9. Further, we find that the decision of the Hon’ble Jurisdictional High

Court in Sind Co-op. Hsg. Society v/s Income-tax Officer, reported in [2009]

317 ITR 47 (Bom.), relied upon in the impugned order for denying the

deduction under section 80P(2)(c) of the Act, is also not applicable to the

facts of the present case as the issue before the Hon’ble Court was whether

any part of transfer fees received by the assessee societies - whether from

outgoing or incoming members - is not liable to tax on the ground of

 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 8

mutuality. Further, as is evident from para-26 of the judgment, the Hon’ble

High Court did not examine the applicability of provisions of section 80P of

the Act in the facts of the case.

10. Insofar as the provisions of section 80P(2)(c) of the Act are

concerned, the same provides for a standard deduction, inter-alia, of INR

50,000 in case of a co-operative society engaged in activities other than

those specified in clause (a) or clause (b) of section 80P(2) of the Act. In the

present case, there is no dispute regarding the fact that the assessee is a

co-operative housing society. Such being the facts, it is ostensible that the

assessee is engaged in activities which is other than those specified in

clause (a) or clause (b) of section 80P(2) of the Act. Therefore, we are of

the considered view that the assessee rightly claimed the deduction of INR

50,000 under section 80P(2)(c) of the Act. Accordingly, the AO is directed to

grant a deduction under section 80P(2)(c) of the Act to the assessee. As a

result, the impugned order is set aside and sole ground raised by the

assessee is allowed.

11. In the result, the appeal by the assessee is allowed.

Order pronounced in the open Court on /02/2025.

/- S/-

Sd/- Sd/-
GIRISH AGRAWAL SANDEEP SINGH KARHAIL
ACCOUNTANT MEMBER JUDICIAL MEMBER

MUMBAI, DATED: 14/02/2025

P.K.Mishra, Sr.PS (on tour)

 Suvarna Nagar Co.op. Hsg. Soc. Ltd. ITA No. 11/M/2025 9

Copy of the order forwarded to:

(1) The Assessee;
(2) The Revenue;
(3) The PCIT / CIT (Judicial);
(4) The DR, ITAT, Mumbai; and
(5) Guard file.
By Order

Assistant Registrar
ITAT, Mumbai