Interest from Co-operative Banks is eligible for Section 80P(2)(d) deduction as they remain Co-operative Societies.

By | April 22, 2026
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Interest from Co-operative Banks is eligible for Section 80P(2)(d) deduction as they remain Co-operative Societies.

The Dispute

The Assessing Officer (AO) argued that because Section 80P(4) excludes “Co-operative Banks” from the general benefits of Section 80P, any interest earned by a society from such a bank should be taxable.

The Verdict

The Tribunal, following Supreme Court precedents (like Mavilayi Service Co-operative Bank), ruled in favour of the Assessee:

  • Identity vs. Activity: While a co-operative bank might perform banking functions, its legal status remains that of a Co-operative Society.

  • Specific Deduction: Section 80P(2)(d) specifically allows a deduction for interest/dividends received from any other co-operative society.

  • The Distinction: The restriction in Section 80P(4) applies to the bank’s own income, not to the income earned by a member society from its deposits in that bank.

II. Hoarding Charges: House Property or Other Sources?

Crux: Hoarding charges for advertisements on society walls are taxable as ‘Income from House Property’.

The Dispute

The assessee permitted the display of hoardings on its building walls and earned “hoarding charges.” The society claimed this as Income from House Property (IFHP) to avail the 30% Standard Deduction under Section 24(a). The AO sought to tax it under Income from Other Sources (IFOS), where no such deduction is available.

The Verdict

The Tribunal ruled in favour of the Assessee:

  • Attachment to Property: Since the hoarding is fixed to the structure of the building (the wall/terrace), the income is derived from the “use of house property.”

  • Consistency: Following the society’s own past successful litigations, the court confirmed that these receipts are not “Other Sources” but are intrinsically linked to the ownership of the building.

  • Benefit: By classifying it as House Property, the society is entitled to the 30% flat deduction for repairs and maintenance.

Key Takeaways for Co-operative Societies

  • Investment Strategy: Interest earned from Nationalized Banks (SBI, PNB, etc.) is taxable, but interest from Co-operative Banks is deductible. Ensure your society’s surplus funds are placed strategically to minimize tax liability.

  • Maximize Standard Deduction: Receipts from cell towers, hoardings, or rooftop leases should be consistently offered as Income from House Property to claim the 30% statutory deduction.

  • Transition to 2025 Act:

    • Section 80P (1961) ➔ Section 149 (2025): The deduction framework for co-operatives.

    • Section 24 (1961) ➔ Section 22 (2025): The deductions allowed from House Property.

    • Ensure your Tax Year 2026 filings use these updated section references while citing the 1961 Act precedents for substantive arguments.

IN THE ITAT MUMBAI BENCH ‘G’
Sambhau Tirth Co operative Housing Society Ltd.
v.
Deputy Commissioner of Income-tax*
ANIKESH BANERJEE, Judicial Member
and Prabhash Shankar, Accountant Member
IT Appeal Nos. 6928 and 6929 (Mum) of 2025
[Assessment years 2015-16 and 2017-18]
MARCH  26, 2026
Viraj Mehta for the Appellant. Smt. Priyanka Mashilkar, Sr. AR for the Respondent.
ORDER
Anikesh Banerjee, Judicial Member.- Both the appeals of the same assessee filed against the separate orders of the Ld. Commissioner of Income Tax (Appeal) ADDL/JCIT (A)-3, Bengaluru [for brevity the “Ld. CIT(A)”], orders passed under section 250 of the Income Tax Act 1961 (for brevity ‘the Act’) for Assessment Years 2015-16 & 2017-18, date of orders 12.08.2025. The impugned orders emanated from the orders of the Ld. Assistant Commissioner of Income Tax -19(3), Mumbai (for brevity the ‘Ld. AO’) order passed under section 143(3) of the Act date of order 29.12.2017 for AY 2015-16 & 31/10/2019 for AY 2017-18.
2. Since both the appeals arise from identical facts and involve a common issue, for convenience they were heard together and are being disposed of by way of this common order. ITA No. 6928/Mum/2025 is treated as the lead case, and the decision rendered therein shall apply mutatis mutandis to ITA No. 6929/Mum/2025.
ITA No.6928/Mum/2025 , AY 2015-16.
3. The assessee has preferred the present appeal before the Bench raising two substantive grounds. The first ground pertains to the addition arising from disallowance of deduction under section 80P(2)(d) of the Act amounting to Rs.13,58,165/-, on the premise that, by virtue of insertion of section 80P(4), a cooperative bank is excluded from the ambit of section 80P. The second ground relates to the rejection of the assessee’s claim of income under the head “House Property” amounting to Rs.66,30,000/-, received from M/s Deesha Leascon Pvt. Ltd. towards rental charges for permitting display of hoardings on the society’s wall. The assessee had claimed standard deduction under section 24(a) of the Act. However, the Ld. AO treated the said income as “Income from Other Sources” and consequently disallowed the claim of standard deduction. Aggrieved by the assessment order, the assessee preferred an appeal before the Ld. CIT(A), who upheld the findings of the Ld. AO. Being further aggrieved, the assessee is now in appeal before us.
4. The Ld.AR argued and contended that the issue is well settled related to deduction of interest earned from co-operative banks is a permissible deduction under section 80P(2)(d) of the Act. The Ld.AR stated that the assessee claimed the deduction of interest which is only related the co-operative bank. So, the deduction is allowable u/sec 80P(2)(d) of the Act.
5. On the other hand, the Ld. DR vehemently argued and stated that in section 80P(4) is restricted to deduction of interest from co-operative banks under section 80P(2)(d) of the Act. Section 80P(4) does not permit the deduction of interest of co-operative banks. The Ld.DR fully relied on the orders of the revenue authorities.
6. We heard the rival submissions and considered the documents available on record. The only issue as agitated by the assessee society related to interest and dividend from co-operative banks which is claimed as deduction under section 80P(2)(d) of the Act. Ld. AR contended that the Ld. CIT(A) cited various judicial precedents but the inference drawn in the instant matter as compared to the matter relied upon by Ld.CIT(A) that the assessee had received interest income from Co-operative Banks and the Nationalised Banks and the same was claimed as deduction u/s 80P(2)(d). Whereas in the instant case, the assessee has received interest only from Co operative Banks. Section 80P(2)(d) provides for deduction of interest received by a Co-operative Society from another Co-operative Society. A Co-operative Society being a Co-operative Society fits into the permissible provisions of the deductions. Thus the case referred by the Ld. CIT(A) in his judgment is not applicable or relatable to the facts of the instant case.
7. The respectful reliance is placed on the judgment passed by Hon’ble Apex Court in the case of Kerala State Co-Operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer ITR 384 (SC). The relevant extract is as follows-
“28. Having heard learned advocates for the respective parties and considering the controversy arising in these tax appeals, we are of the opinion that the controversy sought to be canvassed with regard to deduction under section 80P(2)(d) of the Act is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant SahkariSarofiMandali Ltd. (supra) as well as in case of State Bank of India (supra) wherein it was held that the deduction of under section 80P(2)(d) of the Act is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself
8. Further the we respectfully relied on the order of the Hon’ble Supreme Court in PCIT v. Annasaheb Patil MathadiKamgar Sahakari Pathpedi Limited ITR 117 (SC)/ Civil Appeal No. 8719/2022 dated 20/04/2023, it is held that,
“..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.”
9. The respectful reliance was placed in the order of the Hon’ble Supreme Court in Kerala State Co-Operative Agricultural And Rural Development Bank Ltd (supra) it has been held that,
“15.14..
Conclusion:
In the instant case, although the appellant society is an apex cooperative society within the meaning of the State Act, 1984, it is not a co-operative bank within the meaning of Section 5(b) read with Section 56 of the BR Act, 1949.
In the result, the appeals filed by the appellant are allowed and the order(s) of the Kerala High Court and other authorities to the contrary are set aside. Consequently, we hold that the appellant is entitled to the benefit of deduction under Section 80P of the Act.”
10. In our considered view the issue is well settled by the order of the Hon’ble Supreme Court. The revenue has restricted the claim of deduction U/s 80P(2)(d) in pursuance of section 80P(4) of the Act and the cooperative bank is not considered as cooperative society. Respectful reliance was placed on the order of Annasaheb Patil Mathadi Kamgar Sahakari Pathpedi Limited (supra) and Kerala State Co-Operative Agricultural and Rural Development Bank Ltd. KSCARDB (supra) where the Hon’ble Apex Court categorically stated that cooperative bank is the cooperative society and not acted as Bank under Banking Regulation Act,1949. We note the orders of the coordinate benches of ITAT- Mumbai in case of Jaimuni Sahkari Patpedhi Maryadit v. AUITD [IT Appeal No. 332 to 334 (Mum) of 2025 , dated 6-3-2025] has taken same view in favour of the assessee. So, the interest earned from investment in cooperative bank is allowable deduction U/s 80P(2)(d) of the Act. The addition amount to Rs. 13,58,165/- is quashed.
11. The second ground pertains to the taxability of hoarding charges earned by the assessee. The assessee had treated such receipts as rental income under the head “Income from House Property” and accordingly claimed standard deduction under section 24(a) of the Act. However, the Ld. AO rejected the assessee’s claim and assessed the entire receipts under the head “Income from Other Sources.” During the course of hearing, the Ld. AR submitted that the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench of the ITAT, Mumbai, in the assessee’s own case bearing Sambhav Tirth Coop Housing Society Ltd. v. ITO [IT Appeal Nos. 4925. 2819 (Mum) of 2011 ,dated 11-5-2012] for A.Ys. 2003-04 to 2006-07, order dated 11.05.2012. For the sake of completeness, the relevant observations of the Coordinate Bench as contained in paragraphs 10 and 11 of the said order are reproduced hereunder:
“10 . We have heard the parties and have perused the material and citations quoted before us. We find that the issue is covered by various decisions of the Coordinate Bench of ITAT and also by the Hon’ble jurisdictional High Court. We have also perused the twocase laws cited by the DR. We find that the case of CIT v. Zaibunissa Begum reported in 151 ITR 320 (AP) is on a different issue and hence not applicable. We have also perused the decision of Hon’ble Calcutta High in the case of Mukherjee Estates (P) Ltd v. CIT reported in 244 ITR 1 (Cal.). The facts emerging in that case are different, as seen from the order, and the facts point out that, it was the hoarding only which was leased out and not the terrace portion.” That was the reason why the Hon’ble Calcutta High Court held that letting of the hoardings cannot be taken as income from house property.
11. On going through the facts and the cases cited, we are in agreement with the Authorized Representative and by respectfully following the decisions of the Coordinate bench and the Hon’ble Jurisdictional High Court of Bombay, to which we are bound with, we set aside the order of the CIT(A) and direct the AO in all the four impugned assessment years to treat the income as income from house property and allow allowable deduction(s), as prescribed under the head “Income from house property”.
12. We heard the rival submissions and considered the documents available on record. We find that the issue relating to taxability of hoarding charges is squarely covered in favour of the assessee by the decision of the Coordinate Bench of the ITAT, Mumbai in the assessee’s own case (supra). Respectfully following the said decision, we hold that the hoarding charges are liable to be assessed under the head “Income from House Property” and the assessee is entitled to claim deduction under section 24(a) of the Act. Accordingly, the order of the Ld. CIT(A) is set aside and the Ld. AO is directed to assess the income under the head “Income from House Property” and grant consequential deduction. The ground raised by the assessee is allowed.
13. In the result, the appeal of the assessee bearing ITA No.6928 & 6929/Mum/2025 are allowed.