ITAT Mumbai: Co-operative Society Eligible for Section 80P(2)(d) Deduction on Interest from Co-operative Banks

Infinity Towers Co-operative Housing Society Ltd. filed returns for AYs 2020-21, 2021-22, and 2022-23, claiming deduction under Section 80P(2)(d) on interest earned from investments made with cooperative banks. The returns were processed under Section 143(1), and the CPC disallowed the deduction, leading to a demand of Rs. 8,19,400 for AY 2020-21. The society missed the CPC’s intimation and only became aware after a recovery notice was issued. Appeals were then filed before the CIT(A) with delays ranging from 573 to 1021 days, accompanied by an affidavit explaining that the office-bearers handling taxation matters were super-senior citizens over 80 years of age who inadvertently missed the intimations.

Appeal before CIT(A): The CIT(A), without condoning the delay or examining the merits, dismissed all appeals solely on the ground of limitation. Aggrieved, the assessee filed appeal before the ITAT.

Main Issue: Whether a co-operative housing society is entitled to a deduction under Section 80P(2)(d) on interest earned from investments in co-operative banks, and whether the CIT(A) erred in dismissing the appeals without condoning the delay and without deciding the claim on merits.

ITAT Held: The Tribunal held that the legal position regarding Section 80P(2)(d) is now settled in favour of the assessee. It noted that several High Court rulings, including Ashwinkumar Arban Co-operative Society Ltd. and Shree Madhi Vighag Khand Udyog Sahakari Mandli Ltd., have affirmed that co-operative banks are themselves co-operative societies for Section 80P(2)(d), and interest earned on investments with them is eligible for deduction.

The Tribunal explained that a co-operative society earning interest from a co-operative bank remains eligible for Section 80P(2)(d) deduction. However, the Tribunal remitted the matter to the AO for the limited purpose of verifying the factual quantum of interest earned from the two co-operative banks. The AO has been directed to provide the assessee a fair opportunity of hearing.

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