ITAT Mumbai: Co-operative Credit Society Entitled to Section 80P(2)(d) Deduction on Interest Earned from Co-operative Banks — Consistency Principle Affirmed
Case Reference
ITO Vs Reserve Bank Officers Co-Op. Credit Society Ltd.
Forum: Income Tax Appellate Tribunal, Mumbai
Assessment Year: 2018-19
Order Date: 09.04.2026
Background and Context
This matter arose out of an appeal filed by the Revenue before the Income Tax Appellate Tribunal (ITAT), Mumbai, challenging the order passed by the Commissioner of Income Tax (Appeals) under Section 250 of the Income Tax Act, 1961, for Assessment Year 2018-19.
The assessee in the present case is a co-operative credit society that had deposited its funds with various co-operative banks during the relevant year and consequently earned interest income from such deposits. On this interest income, the assessee claimed a deduction of Rs. 6,70,69,731 under Section 80P(2)(d) of the Income Tax Act, 1961.
What Happened at the Assessment Stage
The Assessing Officer examined the claim but ultimately chose to reject it entirely. Through an assessment order dated 17.04.2021 passed under Section 143(3) read with Section 144B of the Act, a disallowance of Rs. 6,70,69,731 was made, denying the deduction sought by the assessee on interest earned from co-operative bank deposits.
Feeling aggrieved by this disallowance, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals).
Decision at the First Appellate Level
The Commissioner of Income Tax (Appeals) ruled in favour of the assessee. The CIT(A) took note of the fact that the ITAT had already settled this very issue in the assessee's own case for Assessment Years 2009-10 and 2017-18 vide ITA Nos. 1390 & 1391/M/2022 decided on 23.01.2023, wherein the deduction under Section 80P(2)(d) had been expressly allowed.
The CIT(A) reproduced the relevant portion of the Tribunal's earlier ruling, which had relied upon significant judicial precedents, including:
- The judgment of the Hon'ble Kerala High Court in PCIT vs. Percoorkada Service Co. Bank Ltd. (2022) 442 ITR 141 (Kerala) dated 01.11.2021
- The judgment of the Hon'ble Karnataka High Court in PCIT vs. Totagars Co-operative Sale Society (2017) 392 ITR 74 (KAR) dated 5th January 2017
- The earlier ruling in Totagars Cooperative Sale Society (395 ITR 611)
Based on these precedents and the consistency of facts, the CIT(A) directed the Assessing Officer to delete the disallowance and allow the deduction under Section 80P(2)(d) in respect of interest earned from investments with co-operative banks.
Revenue's Appeal Before ITAT
Dissatisfied with the first appellate order, the Revenue Department approached the ITAT Mumbai.