Beat butter, sugar and lemon zest in large bowl until light and creamy.
Add eggs, 1 at a time, beating well after each addition.
Add pineapple with juice and milk, Beat until just combined. Mixture make look curdled, but will come together when flour is added.
Combine flour and baking powder in small bowl. Add to pineapple mixture. Add coconut. Stir well. Line bottoms of 2 greased 8 inch round pans with waxed paper.
Divide and pour batter into pans. Spread evenly.
Bake in 325*F (160*C) oven for about 45 minutes until toothpick inserted in center comes out clean.
Let stand in pans on wire rack for 10 minutes.
Remove cakes from wax paper and resubmit to wire racks to cool completely.