The society had earned ₹4,69,229 as interest income from deposits made with cooperative banks and claimed 100% deduction under Section 80P(2)(d) of the Income Tax Act. The claim was rejected by the CPC, Assessing Officer, and later by CIT(Appeals).

The ITAT did not pass a final order allowing or disallowing the deduction. Instead, it set aside the previous orders and restored the matter to the Assessing Officer for fresh examination.

Key Takeaway from the ITAT Order

Cooperative housing societies can claim tax deduction under Section 80P(2)(d) only on interest earned from deposits kept with eligible cooperative societies or cooperative banks that are not engaged in regular banking business.

If the bank is carrying out normal banking activities (as explained by the Supreme Court in its 2023 Kerala State Co-operative Bank judgment), the interest income will not qualify for 80P(2)(d) deduction and will be taxed as “Income from Other Sources”.

Important Message for All Housing Societies

This order is very relevant for thousands of cooperative housing societies in Maharashtra and across the country. Simply parking funds in any bank that has “Co-operative” in its name is no longer sufficient. Societies will now have to prove the exact legal status and nature of the bank/entity to successfully claim the deduction.

The ITAT has directed the Assessing Officer to verify all documents submitted by the society and strictly follow the Supreme Court ruling before deciding the claim. The society has been given a fresh opportunity to present its case.

This development is likely to impact how housing societies manage their surplus funds and claim tax benefits going forward.

Also Read: Elections For Housing Societies Can Be Held

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