Section 80P(2)(d) Deduction Restored for Housing Co-operative Society: ITAT Pune Rules Against Revenue's Application of Section 80P(4)
Background and Overview
A co-operative housing society registered under the Maharashtra State Co-operative Societies Act successfully challenged the denial of deduction under Section 80P(2)(d) of the Income-tax Act, 1961 before the Income Tax Appellate Tribunal, Pune. The dispute arose from an intimation processed under Section 143(1) for Assessment Year 2021-22, wherein the Revenue disallowed the deduction claimed on interest income earned from deposits maintained with Pune District Central Co-operative Bank (PDCC).
The ITAT, after a detailed examination of the statutory framework and binding judicial precedents, ruled decisively in favour of the assessee, vacating the orders of both lower authorities and restoring the deduction in full.
Facts of the Case: Alaknanda Sahakari Gruharachana Sanstha Maryadit Vs ITO (ITAT Pune)
The assessee — a co-operative housing society — had earned the following interest income during AY 2021-22:
- ₹1,47,640 as interest on Fixed/Term Deposit Receipts (TDRs) held with co-operative banks/institutions
- ₹3,979 as interest on savings account balances maintained with such co-operative banks/institutions
The assessee filed its return of income declaring total income of ₹NIL, after claiming a deduction of ₹1,51,620 under Section 80P(2)(d) of the Income-tax Act, 1961. The return was processed summarily under Section 143(1), and the claimed deduction was disallowed in its entirety. As a result, the total income was computed at ₹1,51,620 instead of NIL.
The assessee carried the matter to the first appellate forum — the Addl./Jt. Commissioner of Income Tax (Appeals) — which, by its order bearing DIN & Order No. ITBA/APL/S/250/2024-25/1064436317(1) dated 29/04/2024 passed under Section 250 of the Income-tax Act, 1961, upheld the Revenue's denial. Consequently, the assessee approached ITAT Pune.
Core Issue Before the Tribunal
The sole question before the Tribunal was not whether the assessee was entitled to claim deduction under Section 80P(2)(d) — that was not in dispute. The Revenue's denial rested entirely on the argument that since PDCC is a co-operative bank, the interest income earned by the assessee from PDCC would be hit by Section 80P(4) of the Act, thereby rendering the deduction ineligible.
The Revenue placed reliance on:
- Mavilayi Service Co-operative Bank Ltd. Vs CIT [2021, 431 ITR 1 (SC)]
- PCIT Vs Totagars Co-operative Sale Society [2017, 83 com 140 (Kar)]