ITAT Pune allows co-operative society tax deduction on interest from co-operative banks

The Income Tax Appellate Tribunal (ITAT) in Pune ruled on 26 October 2026 that a co-operative society is entitled to a deduction under Section 80P(2)(d) of the Income Tax Act, 1961, on interest it earns from investments with co-operative banks. The tribunal allowed the society to deduct Rs 14,69,611 for assessment year 2020-21.

What Happened

According to the order, Forest County Cooperative Housing Society Limited, of Kharadi in Pune, filed its return declaring income of Rs 1.38 crore after claiming deductions of Rs 50,000 under Section 80P(2)(c) and Rs 14,69,611 under Section 80P(2)(d). The interest came from deposits with Saraswat Bank and Pune District Central Cooperative Bank.

The Assessing Officer disallowed the Section 80P(2)(d) claim and assessed the society's income at Rs 1,53,66,990. The appeal authority, the CIT(A) at the National Faceless Appeal Centre, upheld this in an order dated 4 February 2026. The society then appealed to the tribunal.

Section 80P(2)(d) lets a co-operative society deduct income it earns from investments in other co-operative societies. The tribunal said the issue is "no longer res integra", meaning it is already settled, because of a series of earlier decisions. It relied on a 2023 Madras High Court judgment that held a co-operative society entitled to the deduction. Following that, it held the society entitled to the deduction on the Rs 14,69,611, reversed the appeal authority's finding and allowed the appeal.

What It Means

For co-operative societies, including housing societies, that keep surplus funds in co-operative banks, the ruling adds to the line of tribunal decisions that allow the Section 80P(2)(d) deduction on such interest. In this case, the tribunal's order removes the Rs 14,69,611 addition the Assessing Officer had made to the society's income for assessment year 2020-21.

Source: ITAT order