ITAT Surat rules that co-operative housing societies can claim Section 80P(2)(d) deductions on bank interest

The Surat bench of the Income Tax Appellate Tribunal permitted the Section 80P(2)(d) tax deduction concerning interest earnings generated by a co-operative housing society from fixed deposits held at the Surat District Cooperative Bank. The ruling addresses ongoing disputes regarding the taxability of interest earned from investments made by co-operative entities in other co-operative banks. Section 80P(2)(d) of the Income Tax Act provides deductions to co-operative societies on income derived from investments made with other co-operative societies or co-operative banks, fostering mutual financial support within the sector.

Historically, tax authorities frequently disallowed such claims by arguing that co-operative banks function similarly to commercial banks, whereas judicial precedents often reinforce statutory eligibility based on the legal status of the investee institution. Tax practitioners and co-operative housing societies should review past assessment orders, maintain detailed documentation of co-operative bank deposits, and evaluate refund claims where deductions were previously denied.

Bottom line: This ruling strengthens the tax-exempt status of inter-cooperative investments, directly lowering tax liabilities for qualifying societies.