The order was passed in the case of Horizon Co-operative Housing Society Ltd. Worli, for Assessment Years 2013-14 and 2018-19.

The Core Issue

The dispute revolved around whether interest income earned by a co-operative housing society from fixed deposits kept with co-operative banks qualifies for deduction under Section 80P(2)(d).

The Assessing Officer had denied the deduction, arguing that:

• Section 80P(4) excludes co-operative banks from the benefit of Section 80P.
• Therefore, interest earned from co-operative banks should not qualify for deduction.

The CIT(A), NFAC, upheld the disallowance, relying on certain judicial precedents.

What the Tribunal Held

The ITAT disagreed with the lower authorities and ruled in favour of the assessee.

The Bench observed:

• Section 80P(2)(d) allows deduction for interest income earned by a co-operative society from investments made with “any other co-operative society”.
• A co-operative bank is still legally registered as a co-operative society under the relevant State Co-operative Societies Act.
• Section 80P(4) only restricts co-operative banks from claiming deduction on their own income.
• It does not remove their status as a co-operative society for the purpose of Section 80P(2)(d).

The Tribunal emphasized that reading Section 80P(4) as restricting 80P(2)(d) would amount to adding a limitation that the legislature never intended.

Consistency in Earlier Decisions

The Bench also noted that:

• In the assessee’s own case for AY 2017-18, the Tribunal had already allowed similar deduction.
• Multiple coordinate benches have consistently held that interest from co-operative banks is eligible for deduction under Section 80P(2)(d).
• In case of conflicting judicial views, the interpretation favourable to the assessee must be adopted (as per Supreme Court principle in Vegetable Products case).

Accordingly, the ITAT directed the Assessing Officer to delete the disallowance and allow the deduction for both assessment years.

Why This Matters for Housing Societies

This ruling is particularly important because:

• Most housing societies park surplus maintenance funds in co-operative bank FDs.
• Interest income often becomes a taxable dispute area.
• The decision provides clarity that such interest can qualify for full deduction under Section 80P(2)(d), subject to facts.

For co-operative housing societies across Mumbai and Maharashtra, this judgment could significantly reduce tax exposure on interest income from co-operative bank deposits.

Outcome

Both appeals filed by the assessee were allowed.
Order pronounced on 25 February 2026.

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