Co-Operative Housing Society Is Entitled to Section 80P(2)(d) Deduction on Interest Earned From Co-Operative Banks

By | July 30, 2026
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Co-Operative Housing Society Is Entitled to Section 80P(2)(d) Deduction on Interest Earned From Co-Operative Banks

Issue

Whether interest income earned by a co-operative housing society from fixed deposits maintained with co-operative banks is eligible for deduction under Section 80P(2)(d) of the Income-tax Act, 1961.

Facts

  • Assessee Profile: The assessee is a co-operative housing society registered under the relevant co-operative societies legislation.

  • Investment & Claim: For Assessment Year 2021-22, the assessee invested surplus funds in fixed deposits with two co-operative banks and earned interest income.

  • Deduction Claimed: The assessee claimed a deduction on the interest income under Section 80P(2)(d).

  • Disallowance by AO: The Assessing Officer (AO) disallowed the claim, holding that following the insertion of Section 80P(4), a co-operative bank is not considered a co-operative society for the purposes of Section 80P(2)(d).

Decision

  • Co-Operative Status Preserved: Although a co-operative bank is disentitled from claiming Section 80P deductions for itself by virtue of Section 80P(4), it remains a co-operative society registered under the Co-operative Societies Act, 1912, or relevant state laws.

  • Applicability of Section 80P(2)(d): Interest and dividend income derived by a co-operative society from its investments held with a co-operative bank continues to be eligible for deduction under Section 80P(2)(d).

  • Final Ruling: The assessee-housing society is entitled to the claim of deduction under Section 80P(2)(d) on the interest earned from co-operative banks. Decided in favor of the assessee.

Key Takeaways

  • Scope of Section 80P(4): Section 80P(4) restricts co-operative banks from claiming Section 80P deductions on their own earnings, but it does not strip them of their foundational status as co-operative societies.

  • Inter-Co-operative Investments: As long as the entity paying the interest or dividend is fundamentally a co-operative society (including a co-operative bank), the recipient co-operative society can claim deduction under Section 80P(2)(d).

  • Protection for Depositor Societies: Primary co-operative societies and housing societies investing surplus funds in regional or state co-operative banks retain full eligibility for tax-exempt interest income under Section 80P(2)(d).

IN THE ITAT MUMBAI BENCH ‘C’
Orchid Suburbia Cooperative Housing Society Ltd.
v.
Income-tax Officer
SAKTIJIT DEY, Vice President
and Girish Agrawal, Accountant Member
IT Appeal No. 1396 (MUM) of 2026
[Assessment year 2021-22]
JULY  14, 2026
Ajay R. Singh, Adv. for the Appellant. Ajay Soneji, Sr.DR for the Respondent.
ORDER
Girish Agrawal, Accountant Member.- This appeal filed by the assessee is against the order of ld. CIT(A)/ National Faceless Appeal Centre, Delhi vide No. ITBA/NFAC/S/250/2025-26/1081306946(1) dated 29.09.2025 passed against the assessment order by Assessment Unit, u/s 143(3) r.w.s. 144B of the Income-tax Act (hereinafter referred to as the “Act”), dated 19.12.2022, for the Assessment Year 2021-22.
2. Grounds taken by the assessee are reproduced as under:
1. The learned CIT(A) erred in dismissing the appeal of the assessee by holding that the appeal is not filed in time as provided under section 249(2) of the Act without appreciating that assessee had filed application for condonation of delay of 918 days in filing the appeal, explaining the reasons namely reshuffling and change of the society managing committee, delay in conducting election process and difficulty faced by the new committee to get proper legal assistance and guidance, therefore refusing to condone the delay and dismissing the appeal was not justified.
2. The Ld. CIT(A) failed to appreciate that the delay was due to bona fide reasons and assessee being a cooperative housing society functions through voluntary members who come forward and devote their time for managing the affairs of society, without any personal gain, the learned CIT(A) failed to appreciate that such housing society lacks proper guidance and in such complex tax issues the new managing committee had demonstrated sufficient and reasonable cause for the delay, which was neither found to be false, misleading, intentional nor deliberate.
3. The refusal to condone the delay and dismissal of the appeal without adjudication on merits shall put the society to undue hardship and financial constraint more particularly since the case on merits is to be allowed. Additions u/s 80P(2)(d) of Rs. 34,12,756/-:
4. The learned CIT(A) erred in law and on facts in not adjudicating the grounds on deduction of interest earned from cooperative bank of Rs. 34,12,756/- under section 80P(2)(d) of the Income-tax Act, 1961 which was disallowed by Assessing officer by misinterpreting the provisions of the Act and holding cooperative banks are not cooperative society.
5. The learned CIT(A) failed to appreciate that section 80P (4) merely excludes co-operative banks from claiming deduction under section 80P and does not restrict or curtail the eligibility of a co-operative society to claim deduction under section 80P(2)(d) in respect of interest or dividend income earned from investments made with other co-operative societies, including co-operative banks.
6. The learned CIT(A) further failed to appreciate that interest income earned from deposits placed with Shamrao Vithal Co-operative Bank Ltd. and Saraswat Co-operative Bank Ltd. are eligible for deduction under section 80P(2)(d), as both entities are cooperative societies registered under the Co-operative Societies Act, and hence fall squarely within the ambit of section 80P(2)(d) of the Act.
3. At the outset, it is noted that there is a delay of 71 days in filing the present appeal before the Tribunal for which petition for condonation of the delay and affidavit is placed on record. Through its affidavit, submission of the assessee is that the delay occurred owing to change of Society Managing Committee. Assessee got to know about the passing of the impugned order only after recovery notice was received, dated 17.01.2026 with an outstanding demand of Rs. 18,56,166/-. On receipt of this recovery notice, required appropriate actions were taken up by engaging the tax consultant and filing the appeal thereafter. Managing Committee of the assessee passed necessary resolutions in this regard hence there is a delay of 71 days in filing the said appeal. We have considered the submissions and explanations before us and find it appropriate to condone the delay and take up the matter for adjudication.
4. Ld. Counsel for the assessee brought to the knowledge of the Bench that there is a delay of 918 days in filing the first appeal before the ld. CIT(A), for which detailed explanation were furnished seeking condonation of the delay in filing the same. Submissions made by the assessee in this regard are reproduced in the impugned first appellate order in para-2.2 and 2.3. Ld. CIT(A) after having considered the same noted that the impugned assessment order is dated 19.12.2022 and the first appeal is filed on 24.07.2025 resulting in a delay of 918 days which is beyond the statutory limit prescribed u/s. 249(2). He noted the key reasons explained by the assessee for the said delay as-
(i) reshuffling and change of the housing society’s managing committee, which allegedly consumed considerable time in handing over affairs,
(ii) restrictions and operational difficulties arising from postCOVID protocols,
(iii) delay in conduct of elections of the new committee under the supervision of the State Co-operative Election Authority due to overlapping State elections, and
(iv) difficulties in arranging proper legal and tax representation.
4.1 . However, ld. CIT(A) did not find himself convinced with the detailed explanations given by the assessee for condoning the delay. Before us, ld. Counsel for the assessee referred to the affidavit wherein the explanation so given are reiterated. He pointed out that substantial period of delay is attributable to the impact of pandemic of Covid 2019, also in the post Covid period, assessee had to face significant operational challenges as the normal functioning was severely hampered. Thus, it was asserted that assessee had sufficient cause to seek condonation of delay in filing the first appeal before the ld. CIT(A) and deal with the merits of the case instead of disposing it off in limine.
5. To address the issue in hand before us, we need to delve into the understanding of the expression “sufficient cause”. Sub-section 3 of Section 249 contemplates that ld. CIT(A) may admit an appeal after expiry of relevant period, if he is satisfied that there was a “sufficient cause” for not presenting it within that period. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon’ble High Court as well as before the Hon’ble Supreme Court, then, Hon’ble Court were unanimous in their conclusion that this expression is to be used liberally.
5.1. We may make reference to the following observations of the Hon’ble Supreme Court from the decision in the case of Collector Land Acquisition v. Mst. Katiji 167 ITR 471 (SC)/1987 AIR 1353 :
“1 . Ordinarily a litigant does not stand to benefit by lodging an appeal late.
2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties.
3. “Every day’s delay must be explained” does not mean that a pedantic approach should be made. Why not every hour’s delay, every second’s delay? The doctrine must be applied in a rational common sense pragmatic manner.
4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a nondeliberate delay.
5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact, he runs a serious risk.
6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.”
5.2. Similarly, we would like to make reference to authoritative pronouncement of Hon’ble Supreme Court in the case of N. Balakrishnan v. M. Krishnamurthy [Civil Appeal No. 4575-76 of 1998 , dated 3-9-1998]. It reads as under:
“Rule of limitation are not meant to destroy the right of parties. They are meant to see that parties do not resort to dilatory tactics, but seek their remedy promptly. The object of providing a legal remedy is to repair the damage caused by reason of legal injury. Law of limitation fixes a life- span for such legal remedy for the redress of the legal injury so suffered.
Time is precious and the wasted time would never revisit. During efflux of time newer causes would sprout up necessitating newer persons to seek legal remedy by approaching the courts. So a life span must be fixed for each remedy. Unending period for launching the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time.
A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words “sufficient cause” under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain v. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal v. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his plea and to shut the door against him. If the explanation does not smack of mala fides or it is not put forth as part of a dilatory strategy the court must show utmost consideration to the suitor. But when there is reasonable ground to think that the delay was occasioned by the party deliberately to gain time then the court should lean against acceptance of the explanation. While condoning delay the Could should not forget the opposite party altogether. It must be borne in mind that he is a looser and he too would have incurred quiet a large litigation expenses. It would be a salutary guideline that when courts condone the delay due to laches on the part of the applicant the court shall compensate the opposite party for his loss.”
5.3. We do not deem it necessary to re-cite or recapitulate the proposition laid down in other decisions. It is suffice to say that the Hon’ble Courts are unanimous in their approach to propound that whenever the reasons assigned by an applicant for explaining the delay, then such reasons are to be construed with a justice-oriented approach.
6. We have considered the submissions made before us. Ld. CIT DR objected on the submissions made by the assessee by contending that the assessee has defaulted before the authorities below in complying with the requirements. We have perused the material placed on record and gone through the orders of the authorities below. The facts of the case have already been narrated in the above paragraph.
7. Considering the submissions made by the assessee before the Id. CIT(A) as well as contentions raised through its grounds in the present appeal, we do take note of Hon’ble Supreme Court’s repeated emphasis on the view that “substantial justice” must prevail over technical lapses, we emphasize that the merits should not be stifled due to a failure to respond to notices, provided such failure is not mala fide.
8. In the light of the above, if we examine the facts, then it would reveal that there is delay of 918 days in filing of first appeal. For the just decision of the controversy, considering the explanation furnished by the assessee, we find it appropriate to condone the delay in filing the appeal before ld. CIT(A).
9. The issue involved in the present appeal is in respect of disallowance of deduction claimed by the assessee u/s. 80P(2)(d) on account of interest income earned from fixed deposits investments made with cooperative banks. Assessee is a cooperative housing society registered under Maharashtra State Cooperative Act, 1960 vide registration No. MUM/SRA/HSG/(TC)/12650/YEAR 2015, dated 10.12.2015. Assessee filed its returns on 15.03.2022 reporting its income at Rs. 20,30,350/-after claiming deduction u/s 80P(2)(d) of Rs. 34,12,756/-. Case was selected for complete scrutiny through CASS on the issue of “First year of claim of deduction u/s 80P”. Ld. Assessing Officer in his order has taken note of the fact from the submissions made by the assessee that it had invested in other cooperative banks namely Shamrao Vithal Cooperative Bank Limited and Saraswat Cooperative Bank Limited, from where it earned interest of Rs.18,29,129/-and Rs.15,83,627/- (totalling to Rs.34,12,756/-) respectively from the said two cooperative banks during the year. Assessee had filed its audit report, bank statement to substantiate its claim of deduction u/s. 80P(2)(d). However, he after considering all the submissions disallowed the claim of the assessee u/s. 80P(2)(d) for the said interest income.
10. The aspect of allowability u/s.80P(2)(d) is extensively dealt by the Hon’ble High Court of Karnataka in case of the PCIT v. Totagar Cooperative Sales Society Limited 392 ITR 74 (Karnataka). Relevant findings given in para 7 to 12 are as under:
“7. However, the contention being taken by the learned counsel is untenable. For the issue that was before ITAT, was a limited one, namely whether for the purpose of Section 80P(2)(d) of the Act, a Co-operative Bank should be considered as a Co-operative Society or not? For, if a Co-operative Bank is considered to Cooperative Society, then any interest earned by the Co-operative Society from a Cooperative Bank wo necessarily be deductible under Section SOP(I) of the Act.
8. The issue whether a Co-operative Bank is considered to be a Co- operative Society is no longer res integra. For the said issue has been decided by the ITAT itself in different cases. Moreover, the word “Co-operative Society” are the words of a large extent, and denotes a genus, whereas the word “Co-operative Bank” is a word of limited extent, which merely demarcates and identifies a particular species of the genus Co-operative Societies. Co- Operative Society can be of different nature, and can be involved in different activities; the Cooperative Society Bank is merely a variety of the Co-operative Societies. Thus the Cooperative Bank which is a species of the genus would necessarily be covered by the word “Co-operative Society”.
9. Furthermore, even according to Section 56(i)(ccv) of the Banking Regulations Act, 1949, defines a primary Co-operative Society bank as the meaning of CoOperative Society. Therefore, a Co-operative Society Ban. would be included in the words ‘Co- operative Society’.
10. Admittedly, the interest which the assessee respondent had earned was from a Co-operative Society Bank Therefore, according to Sec. 80P(2)(d) of the IT. Act, the said amount of interest earned from a Co-operative Society Bank would be deductible from the gross income of the Co-operative Society in order to assess it: total income. Therefore, the Assessing Officer was not justified in denying the said deduction to the assessee respondent.
11. The learned counsel has relied on the case of Totgars Co- operative Sale Society Ltd. v. inO (2010) 322ITR 283  (SC). However, the said case dealt with the interpretation, and the deduction, which would be applicable under Section 80P(2)(a)(i) of the I.T. Act. For, in the present case the interpretation that is required is of Section 80P(2)(d) of the L.T. Act and not Section 80P(2)(a)(i) of the IT. Act. Therefore, the said judgment is inapplicable to the present case. Thus, neither of the two substantial questions of la canvassed by the learned counsel for the Revenue even arise it is the present case.
12. For the reasons stated above, this Court does not find any merit in the present appeal. Hence, the appeal is dismissed.”
11. We also find that the issue before us of whether a co-operative society would be entitled for claim of deduction under Sec. 80P(2)(d) for the interest income derived from its investments held with a cooperative bank or not, is covered in favor of the assessee not only by the decision of Hon’ble High Court of Karnataka referred above but also in plethora of cases including few of the following cases:
(i)Land and Cooperative Housing Society Ltd. v. ITO (2017) 46 CCH 52 (Mum)
(ii) C. Green Cooperative Housing and Society Ltd. v. ITO [ITA No. 1343/Mum/2017, dated 31-03-2017]
(iii)Marvwanjee Cama Park Cooperative Housing Society Ltd. v. ITO [ITA No. 6139/Mum/2014, dated 27-09-2017].
12. From the above, we understand that under section 80P(2)(d) assessee is entitled for the deduction in respect of interest or dividends received from investments made with any other cooperative societies. From the above extraction, we also note that Hon’ble High Court held that the word ‘cooperative society’ are the words of large extent and denotes a genus, whereas the word ‘cooperative bank’ is a word of limited extent, which merely de-markets and identifies a particular species of the genus ‘cooperative societies’. Thus, a cooperative bank is merely a variety of the cooperative societies which can be of a different nature and can be involved in different activities.
12.1. 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, however, since a cooperative 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 in force in any state for the registration of cooperative societies, therefore, the interest and dividend income derived by a cooperative 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. Considering the factual matrix in the present case which are akin to the judicial precedents dealt above and the judicial precedents referred, we hold that assessee is entitled to claim of deduction u/s. 80P(2)(d). Accordingly, disallowance made by the ld. Assessing Officer is deleted.
14. In the result, appeal filed by the assessee is allowed.