ALTHAN BHATAR URBAN CO OP CREDIT SOCIETY LIMITED,SURAT vs. DEPUTY/ACIT, CIRCLE-1(3), SURAT

In The Income Tax Appellate Tribunal, “SMC” Surat Bench, Surat Before Dr. Arjun Lal Saini, Accountant Member आयकरअपीलसं./ITA No. 483 & 484/SRT/2026 (�नधा�रणवष�/Assessment Year: (2018-19 & 2020-21) Althan Bhatar Urban Co. Op. Credit Deputy/Assistant Commissioner Society Ltd. of Income Tax Officer, Vs. Shop No.5, Anand Appartment, Nr. National Faceless Assessment Jariwala Stores, Bhatar, Centre, Delhi Surat – 395007,Gujarat Jurisdictional AO, circle – 1(3), ITO, Surat – 395001 �थायीलेखासं./जीआइआरसं./PAN/GIR No.: AAAAA7721R (अपीलाथ�/Appellant) (��यथ�/Respondent)

Appellant by : Shri P M Jagasheth, CA Respondent by : Shri Ajay Uke, Ld. Sr. DR Date of Hearing : 18/05/2026 : 01/06/2026 Date of Pronouncement

ORDER Per, Dr. Arjun Lal Saini, AM:

Captioned two appeals filed by the assessee, pertaining to different Assessment Year 2018-19 & 2020-21, are directed against the separate orders under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Assessment Centre/Delhi(hereinafter referred to as “NFAC”), dated 05.03.2026, which in turn arise out of an assessment order passed under section 143(3) of the Act, by the Assessing officer (hereinafter referred to as “AO”), dated 20.04.2021 & 12.09.2022.

. Act and assessee claimed deduction u/s 80P(2)(d) of the Act to the tune of Rs.23,56,365/-. In ITA No.484/SRT/2026 for assessment year (AY) 2020-21, the assessee claimed the deduction u/s. 80P(2)(d) of the Act to the tune of Rs.24,95,722/- .The assessee deposited the amount in the another Co-operative Society and earned the interest on such amount and, therefore this issue is squarely covered in favour of the assessee, by several judgement of the Tribunal and it is also covered in the assessee’s own case under consideration, by the order of the Division Bench of Surat, vide order dated 151/SRT/2024 for assessment year (AY) 2014-15, vide order dated 31.03.2022, wherein the Tribunal held as follows:

“10. We have heard both the parties and perused the materials available on record and the case law cited by the parties. We note that assessee has not claimed the deduction in respect of interest received from co-operative bank to the tune of Rs.16,15,315/-. The Ld. AR has invited our attention towards paper book page nos. 1 to 3 of assessee`s paper book and explained before the Bench, at the time of hearing that assessee has never claimed the deduction in respect of interest received from co-operative bank to the tune of Rs.16,15,315/-. Hence, based on this factual position, we are of the view that order passed by the assessing officer should not be erroneous. 11. Apart from this, assuming assessee has claimed deduction in respect of interest received from co-operative bank, in that situation, we are of the view that u/s 80P(2)(d) of the Act interest received from co-operative bank are allowable deduction, that is, the deduction is available in respect of interest received from co-operative bank for that reliance can be placed on the order of this co-ordinate Bench, in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. vs. Principal Commissioner of income Tax-2,Surat in ITA No. 283/SRT/2019 dated 12.05.2021, wherein the co-ordinate bench held as follows: “9. On merit of the case the learned AR for the assessee submits that the assessee earned interest from its investment in cooperative bank. The cooperative banks are primarily a cooperative society, as has been held by various benches of Tribunal. Cooperative societies interest income from deposit with the cooperative bank is eligible for claim of deduction under section 80P(2)(d). The learned AR of the assessee further submits he has also furnished his written submission and the same may be considered in support of his various other submissions. In support of his submission the learned AR of the assessee relied upon the following decisions:  Surat Vankar Sahkari Sangh Vs ACIT [2016] 72 taxmann.com 169 (Gujarat),  CIT Vs Sabarkantha District Co-operative Milk Producers Union ( Tax Appeal No. 473 of 2014 dated 16/06/2014,

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.  Merwanjee Cama Park Co-operative Housing Society Vs ITA in ITA No. 6139/Mum/2014,  Kanilndass Udyog Bhawan Premises Co-operative Society Ltd Vs ITO [2018) taxmann.com 15 (Mumbai Trib),  Veer Cooprative Groupm Housing Society Vs ITO [2018] 67 ITR (trib) ITAT (Del),  PCIT Vs Totgars Co-operative Sales Society ltd. [2017] 78 taxmann.com 169(Knt),  Totgars Cooperative Sales Society ltd Vs ITO [2010] 188 Taxman 282 (SC),  The Uttar Gujarat Uma Co-operative Society Vs ITO (ITA No. 1670 &1671/Ahd/2018 dated 28/02/2019,  Menasi Seemeya group Gramagala Seva Sahakari Sangh Niyamitha Venalli Vs CIT (ITA No. 609 & 610/ BNG/2014 dated 06/02/2015,  Solitaire CGHS Vs PCIT (ITA No. 3155/Mum/2019),  Sasme Co-op Society Vs PCIT (ITA No. 185/SRT/2020 dated 03.03.2021). 10. On the other hand the learned CIT-DR for the revenue supported the order of learned PCIT. The learned DR further submits that the order passed by assessing officer is not only erroneous but it is prejudicial to the interest of revenue as well. The assessing officer simply allowed the deduction under section 80P(2)(d) without discussing the issue in details and the nature of interest earned by assessee on deposit with cooperative banks. The order is not in accordance with the decision of Hon'ble Karnataka High Court Totagars cooperative sales society (second Totagars case) (supra). Thus, the order passed by in allowing deduction under section 80P(2)(d) assessing officer is certainly prejudicial to the interest of revenue. The twin conditions of section 263 that assessment order is erroneous and insofar as prejudicial to the interest of revenue, clearly available in this case. The learned CIT prayed for upholding the order passed by learned PCIT by dismissing the appeal filed by the assessee. 11. We have considered the rival submission of both the parties. We have also deliberated on the written submission filed by learned AR of the assessee and various case laws relied by him during his submission. We have also gone through the various documentary evidences filed in the form of paper book (PB) by learned AR of the assessee. We have noted that during the assessment the Assessing Officer vide notice under section 143(2)/142(1) of the Act dated 31.08.2015 and 13.04.2016. The assessee filed its reply through its CA (AR) and furnished required details and after examining the issue allowed the deductions under section 80P(2)(d) as discussed in para 4 of the assessment order. The Assessing Officer passed assessment order on 18.10.2016. 12. The ld. PCIT before passing under section 263 of the Act, identified the issue regarding the claim of deduction under section 80P(2)(d) in its show cause notice dated 06.03.2019. The assessee in its reply dated 7.03.2019 clearly explained that the issue was examined by Assessing Officer and that the assessment order is not erroneous. The assessee also explained that similar disallowances /issues was subject matter in the appeal filed by the

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. revenue before Tribunal in A.Y. 2009-10, 2010-11 and 2012-13 and the assessee was allowed similar deductions. 13.The Hon'ble Jurisdictional High Court in Aryan Arcade Ltd., vs PCIT (2019) 412 ITR 277 (Gujarat) held that merely because Commissioner held a different belief that would not permit him to take the order in revision, it if further held that when Assessing Officer made full enquiry, he made up his mind, the notice of revision is not valid. (emphasis added by us). Further, Hon'ble Madras High Court in CIT Vs Mepco Industries Ltd., (2007) 207 CTR 462 (Madras) held that when two views are possible on an issue and it is not the case of the Commissioner that the view taken by Assessing Officer is not permissible in law, Commissioner cannot invoke his jurisdiction under section 263 of the Act. (emphasis added by us) 14.As we have noted above the assessing officer has made enquiries on the allowability of deduction under section 80(P)(2)(d) and passed the assessment order, thus, the Assessing Officer has taken a reasonable and possible view which cannot be held as erroneous. 15.The Hon'ble Karnataka High Court in PCIT Vs. Totagars Co-operative Sales Society [2017] 78 taxman.com 169 (Karnataka) held that for the purpose of section 80P(2)(d) a Co-operative Bank should be considered by a Co-operative Society and interest earned by Co-operative Society from Co-operative Bank would necessarily be deductible under section 80P(1) of the Act. Further, the Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd., vs. ACIT [2016] 72 taxmann.com 169 (Guj) held that assessee co- operative society is eligible for deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank. 16.The Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Cooperative Milk Producer Union Ltd., vs. DCIT [2019] 111 taxmann.com 69 (Rajkot Tribunal) also held the assessee co-operative society could not claim benefit under section 80P(2)(d) in respect of interest earned by it from deposits made with nationalized/private banks, however, the said benefit was available in respect of interest earned and on deposits made with co- operative bank. Thus, in view of the aforesaid legal discussion we are of the considered view that order passed by Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that orders is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case. 17.Moreover, we have seen that in assessee’s own case for A.Y. 2009-10, 2010-11 and 2012-13, the similar disallowance under section 80P(2)(d) was made by the assessing officer while passing assessment order under section 143(3), however, on appeal before Ld. CIT(A) , the disallowances were deleted and the order of the Ld. CIT(A) in all years were confirmed. 18.The ld. DR for the revenue relied on the case law in PCIT Vs. Totagars Cooperative Sales Society (second case)/(supra), wherein the Hon'ble Karnataka High Court held that interest earned by a Co-operative Society from surplus deposits kept with Co-operative bank, is not eligible for deduction under section 80P(2)(d). Considering the legal position that when there are conflicting decisions of non-jurisdictional High Courts, on similar issue, the decision of Jurisdictional High Court is having binding precedent. Thus, keeping in view of the decision Hon'ble Jurisdictional High Court in Surat Vankar Sahakari Sangh Ltd., vs. ACIT (supra) wherein the assessee-co-operative society is held eligible for

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. deduction under section 80P(2)(d) in respect of gross interest received from co-operative bank without adjusting interest paid to said bank, we conclude that the order passed by assessing officer is not erroneous. Hence, the grounds of appeal raised by assessee are allowed.” 12. Having gone through the order of Co-ordinate Bench (supra), we note that on the identical issue, Ld. PCIT had exercised his jurisdiction u/s 263 of the Act and the Co- ordinate Bench in the case of Bardoli Vibhag GramVikas Co.Op. Credit Society Ltd. (supra) has quashed the order passed by Ld. PCIT u/s 263 of the Act. We see no reason to take any other view than the view so taken by the Co-ordinate Bench in the case of Bardoli Vibhag Gram Vikas Co-operative Credit Society Ltd. (supra), therefore respectively following the binding precedent we quash the order passed by Ld. PCIT u/s 263 of the Act. We order accordingly.”

“Analysis and Conclusion 23.We have heard both the parties and carefully gone through the submissions put forth on behalf of the assessee along with the documents furnished and the case laws relied upon, and perused the facts of the case including the findings of the ld. PCIT and other material brought on record. We note that during the assessment proceedings, the Assessing Officer issued notice under section 142(1) of the Act, dated 16.01.2020, which is placed at paper book page no.15, wherein the Assessing Officer has especially asked the assessee, to furnish eligibility criteria of deduction claimed in different sections of Chapter VI-A, especially under section 80P(2)(a)(i) and under section 80P(2)(d) of the Act. The assessing officer, has also asked the assessee to furnish the documentary evidence in support of its claim of deduction under Chapter VI-A. In response to the said notice under section 142(1) of the Act, the assessee has submitted its reply, dated 01.12.2020 (vide paper book page nos. 17 to 21),before the Assessing Officer, the relevant part of the assessee`s reply dated 01.12.2020, is reproduced below:

From the above computation of total income and explanation of the total income submitted by the assessee, before the assessing officer, we find that assessee has shown, interest received from cooperative bank on fixed deposit, as income in profit and loss account, at Rs.18,41,436/-, (Vide assessee`s paper book page No.28), however the assessee has deducted, the said interest of fixed deposit of Rs.18,41,436/-, from its business income, in the computation of total income, (vide assessee`s computation of total income on page No. 25 of the assessee`s paper book),and the amount of Rs.18,41,436/- is show by the assessee, in the computation of total income, under the head income from other sources,and claimed the deduction u/s 80P(2)(d) of the Act, at Rs.18,41,436/-. The assessee has also shown, under the head income from other sources, amount of Rs.52,350/-, as dividend received from Co-operative Bank and claimed the deduction u/s 80P(2)(d) of the Act. 24. During the course of hearing, ld Counsel for the assessee, clarified the Bench that assessee, by mistake, wrongly submitted, in the written submission, before the ld. PCIT, as if, the assessee claimed deduction under section 80P(2) (a) (i) of the Act, in respect of amount ofRs.18,41,436/- and Rs.52,350/-, in fact, the assessee has claimed the deduction u/s 80P(2)(d) of the Act, amounting to Rs.18,41,436/- and amounting toRs.52,350/-, respectively, as stated above. Thus, we note that ld. PCIT has exercised his jurisdiction under section 263 of the Act, mainly on the amount of Rs.Rs.18,41,436/-and Rs.52,350/-, as narrated above, andld. PCIT directed the assessing officer to examine the dividend . income, if the dividend income is earned by the assessee from Co-operative Bank. Therefore, ld. PCIT directed the assessing officer to disallow the interest and dividend income earned from Co-operative Bank, which, as per ld PCIT, are not eligible for deduction under section 80P(2)(d) of the Act. 25. We note that the assessee’s case was selected for limited scrutiny to examine investments, advances, loans, unsecured loans, deduction from total income under Chapter VI-A of the Act. The findings of the Assessing Officer under section 143(3) of the Act,are reproduced below: “1. The case was selected for Limited Scrutiny assessment under the E-assessment Scheme, 2019 on the following issues: S. No. Issues i. Investments/Advances/Loans ii. Unsecured Loans iii. Deduction from Total Income under Chapter VI-A The assessee society has filed Return of Income for AY.2018-19 on 13.08.2018, vide acknowledgment no.108456181130818, reflecting Gross Total Income Rs.43,36,723/- and after claiming deduction u/s 80P(2) of the I.T. Act, 1961 Returned income is declared NIL. The same is processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter mentioned Act). 2. Notice u/s 143(2) of the Act issued on 22.09.2019 and thereafter notices u/s 142(1) of the Act along with questionnaire were issued. 3. In response to the notices issued, the assessee society has furnished all the relevant details called for. The same has been perused carefully and found to be in order. 4. In view of the above facts of the case and after considering the details furnished, the total income returned by the assessee is accepted.” 26. From the above assessment order, it is vivid with that during the assessment proceedings, the assessing officer issued notice under section 142(1) of the Act, dated 16.11.2020, which is placed at assessee`s paper page No.15, and response to the said notice of 142(1) of the Act, the assessee submitted its reply, dated 01.12.2020, which is placed at paper book page No. 17 to 23. Therefore, no doubt, that during the assessment proceedings, the assessing officer called the details from the assessee to examine the deduction claimed by the assessee, under section 80P(2)(a)(i) of the Act and under section 80P (2) (d) of the Act, hence, details has been called by the assessing officer during the assessment proceedings, and these details were examined by the assessing officer, pertaining to issue raised by the ld PCIT, relating to deduction under section80P (2) (d) of the Act, that is, the solitary issue raised by the ld PCIT, that interest received from Co- operative Banks are not allowed under section 80P(2)(d) of the Act. In this regard, the ld Counsel for the assessee submitted that since during the assessment proceedings, the Page 9 of 17

. assessing officer had examined the issue raised by the ld PCIT and has taken the plausible view, therefore, order passed by the assessing officer, is neither erroneous nor prejudicial to the interest of revenue, hence order passed by the ld PCIT, under section 263 of the Act, may be quashed. 27. However, we do not agree with the arguments advanced by the ld. Counsel for the assessee, to the effect that the assessing officer has examined the issue raised by the ld PCIT, by calling the details from the assessee, and has taken the plausible view. We note that just to call the details by issuing notice under section 142(1) of the Act and in response to that notice submission made by the assessee and assessing officer, having examined the details filed by the assessee, took the plausible view, is not sufficient. Over and above, such exercise narrated above, the order passed by the assessing officer, should be sustainable in the eye of law. 28. Hence, we have to examine, whether order passed by the assessing officer, in the assessee’s case under consideration is sustainable in the eye law.Therefore, we find merit in the submissions of the ld. D.R. for the Revenue to the effect that by way of issuing notice u/s. 142(1) of the Act and reply of the assessee against the notice u/s 142(1) of the Act, and then examination by the assessing and taking the plausible view, is not sufficient. The ld. D.R. for the Revenue stated that in the assessee’s case under consideration, assessing officer cannot take a plausible view specially when there is a judgement of Hon’ble Gujarat High Court in the case of Katlary Karyana Merchant Sahkari Sarafi Mandali Ltd. (2022) 140 taxmann.com 602 (Gujarat), wherein it was held that interest received from co- operative banks and other banks are not eligible for deduction u/s. 80P(2)(d) of the Act. The reason being, the assessing officer ignored the judgement of the jurisdictional High Court of Gujarat,in the case of Katlary Karyana (Supra). Therefore, ld. D.R. stated that the order passed by the assessing officer is not sustainable in the eyes of law and hence the ld. PCIT has rightly exercised his jurisdiction as per clause (d) of explanation 2 of section 263 of the Act.Therefore, as per ld. DR. for the Revenue the order passed by the assessing officer is erroneous as well as prejudicial to the interest of the Revenue. We note that arguments advanced by the ld. D.R. for the Revenue carries weight and he has rightly stated that order passed by the assessing officer is not sustainable in the eyes of law. We also agree that during the assessment proceedings just to call the details by issuing notice u/s. 142(1) of the Act and in response to that submission of the details by the assessee and then examining the same by assessing officer(AO) and having examined the same, assessing officer takes plausible view, is not sufficient.However, that plausible view should be sustainable in the eyes of law, as there is direct judgement on the issue under consideration by the jurisdictional High Court of Gujarat, in the case of Katlary Karyana (Supra). 29. In order to find the answer of the question that plausible view taken by the assessing officer (AO) should be sustainable in the eye of law, we have to take guidance from the judgement of the Hon`ble Supreme Court, and for that, let us take the guidance of judicial precedents laid down by the Hon’ble SupremeCourt in Malabar Industries Ltd. vs. CIT [2000] 243 ITR 83(SC) wherein their Lordship have held that twin conditions needs to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and so far as prejudicial to the interest of the Page 10 of 17

. Revenue. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer’s order was passed on incorrect assumption of fact; or (ii) incorrect application of law; or (iii)Assessing Officer’s order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; then the order passed by the Assessing Officer can be termed as erroneous order. Coming next to the second limb, which is required to be examined as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue. When this aspect is examined one has to understand what is prejudicial to the interest of the revenue. The Hon’ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. “prejudicial to theinterest of the revenue’’ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Their Lordship held that it has to be remembered that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue“unless the view taken by the Assessing Officer is unsustainable in law”. 30. Taking note of the aforesaid dictum of law laid down by the Hon’ble Apex Court, let us examine the issue under consideration. We agree with the ld. D.R. for the Revenue that just to collect the details during the assessment proceedings by issuing notice 142(1) of the Act, and furnishing of the details by the assessee, in response to that notice, and then after examination of the issue by AO and then to take a plausible view, by assessing officer is not sufficient, as we have noted that Hon’ble Apex Court in the case of Malavar Industries Ltd. (supra) has clearly pointed out that the view taken by the assessing officer, should be sustainable in the eyes of law. Therefore, in these circumstances, we have to examine whether it was necessary for the assessing officer to accept the ratio laid down by the Hon’ble Jurisdictional High Court in the case of Katlary Karayana (supra), wherein the Hon’ble Court has noted that interest from Co-operative banks and other banks are not eligible for deduction under section 80P(2)(d) of the Act. Since it is the judgement of the Jurisdictional High court of Gujarat, therefore, assessing officer should not take a plausible view specially when there is a judgment of jurisdictional High Court.Therefore, we have to examine whether judgement of Hon’ble Jurisdictional Gujarat High Court in the case of Katlary Karayana(supra),is applicable to the assessee’s case under consideration or not. 31. We find that in section 80P(2)(d) of the Income Tax Act,1961, there is no special exclusion that interest received from co-operative bank is not eligible for deduction. We have noted that definition of “co-operative society” as mentioned in section 2(19) of the Income Tax Act, 1961 does not make any exclusion about co-operative bank. We note that in order to become a co-operative bank, the first condition is that it should be a co- operative society. Therefore, a co-operative society, later on decides to take license from the Reserve Bank of India to do banking business wherein the Co-operative society may lend the money and borrow the money, and for that purpose, the co-operative society has to take a license from the Reserve Bank of India and after taking license from the Reserve Bank of India said Co-operative society, becomes a co-operative bank also, which wasfirst

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. a co-operative society. We also find that the decision rendered by the Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra), is in the context of a specific definition mentioned in section 194A of the Act, therefore, the judgement delivered by the Jurisdictional High Court in the case of Katlary Karayana (supra), is in a different context. Besides the judgement of Hon’ble High Court of Gujarat in the case of Katlary Karayana(supra) is in the context of reopening of assessment u/s 147/148 of the Act wherein the Hon’ble Court has examined whether income has escaped assessment or not. Hence, this judgment is not binding precedent on the assessee where there are other direct judgments of the Hon’blejurisdictionalGujarat High Court on the ‘issue’ under consideration, which we are going to discuss in the subsequent paragraphs of this order. 32. We note that the Hon’ble Jurisdictional Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Ltd. In Tax Appeal No.473 of 2014 dated 16-06-2014 (Guj HC) held that interest received from the co-operative bank is allowable as a deduction u/s.80P(2)(d) of the Act.We also find that there is another judgment of the Hon’ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. 421 ITR 134 (Guj HC) wherein the Hon’ble Gujarat High Court held that interest received from co-operative bank is allowable deduction u/s. 80P(2)(d) of the Act. Therefore, we find that the above judgments i.e. in case of Sabarkantha District Co- operative Milk Producers Union Ltd (supra) and in case of Surat Vankar Sahakari Sangh Ltd. (supra), the Hon’ble Jurisdictional High Court clearly held that interest received from Co-operative banks, are allowable as a deduction u/s. 80P(2)(d) of the Act. These two old judgments were not distinguished by the Hon’ble Jurisdictional High court in the case of Katlary Karayana(supra) i.e. the Hon’ble Jurisdictional High Court of Gujarat did not overrule and did not distinguish and reject the earlier judgments delivered by it in case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and Surat VankarSahakari Sangh Ltd. (supra), in the case of the latest judgement of Hon’ble Gujarat High Court in the case of KatlaryKarayana (supra). Therefore, the Hon’ble jurisdictional High Court of Gujarat in the case of KatlaryKarayana (supra) has not overruled the ratio decided by it in the earlier judgments namely; (i)Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra). Therefore, ratio of these old judgments namely;(i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) will still be applicable to the assessee under consideration as these judgements never distinguished and never overruled by constituting a larger Bench by the Hon’ble Jurisdictional Gujarat High Court. 33. We also find that the Hon’ble jurisdictional High Court in the case of State Bank of India v. CIT 2016 389 ITR 578 (Guj. HC) has also held that any income by way of interest derived by a Co-operative society from its investment with any other Co-operative bank would be deductible u/s. 80P(2)(d) of the Act. 34. We also find that Hon’ble Gujarat High Court has recently modified the judgement delivered by it in Katlary Karayana (supra) on 26th April, 2024 by removing error in the judgment of Katlary Karayana (supra). The ld DR for the Revenue, informed the Bench that Hon`ble High Court has only removed the word “co-operative” from the reproduction of reasons recorded by the assessing officer. Hence it does not impact on the ratio laid down by the Hon`ble Page 12 of 17

. Court. Learned Counsel for the assessee, has also argued before the Bench and submitted written submission that there is no material modification done by the Hon`ble Gujarat High Court in the case of Katlary Karayana (supra). 35. Therefore, we find that the assessing officer has taken the plausible view which is sustainable in the eyes of law i.e. the view taken by the assessing officer is not against the judgment of the Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra). Because, the assessing officer has taken the plausible view based on the old judgements of the jurisdictional, Hon`ble High Court of Gujarat, namely; (i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) and the ratio of these old judgments namely; (i) Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and, (ii) Surat Vankar Sahakari Sangh Ltd. (supra) would still be applicable to the assessee under consideration, as these judgements never distinguished and never overruled by constituting a larger Bench by the Hon’ble Jurisdictional Gujarat High Court.Hence, we find that the assessing officer has definitely taken a plausible view after examination of the issue under consideration which cannot be subject to revision by the ld. PCIT u/s. 263 of the Act because the view taken by the assessing officer is sustainable in law. Therefore, the argument advanced by the ld. D.R. for the Revenue, to the effect that assessing officer has failed to make compliance of the judgment of Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra), is not acceptable, as the assessing officer, has taken the view which is sustainable in the eye of law, based on the old judgements of the jurisdictional High Court of Gujarat, which are direct judgements on the issue under consideration, hence, there is no violation of judicial discipline by the assessing officer. 36. Now, we have to deal other arguments of the ld. D.R. for the revenue one by one, are as follows: (i) The ld. D.R. for the Revenue argued that recently the Jurisdictional Tribunal, Rajkot in the case of Lodhika Seva Sahakari Mandali vs. PCIT, in ITA No. 184/Rjt/2022 for assessment year 2017-18 vide order dated 5th April, 2014 wherein the Jurisdictional Co-ordinate Bench of Rajkot has considered the judgement of Hon’ble Gujarat High Court in the case of Katlary Karayana (supra) and adjudicate the issue in favour of the assessee. In this context, we state that the decision of the Co-ordinate Bench of Rajkot in the case of Lodhika Seva Sahakari Mandali (supra), no doubt, it is against the assessee and in favour of the Revenue, however, we note that it is not a speaking order. We find that the Co-ordinate Bench, in Lodhika Seva Sahakari Mandali (supra) did not narrate the facts properly and the facts narrated in Lodhika Seva Sahakari Mandali (supra) are not similar to the facts as that of the assessee under consideration. We also find that in the decision of the Co-ordinate Bench in case of Lodhika Seva Sahakari Mandali (supra), there was no assistance from the A.R. of the assessee, as this order was heard by the Co-ordinate Bench ex parte and there is no representation by the A.R. of the assessee, therefore, the Bench was not informed about the correct ratio laid down by the Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra). The adjudication was done by the Co-ordinate Bench, based on written submission of assessee. Therefore, the judgment of the Co-ordinate Bench in the case of Lodhika Seva Sahakari Mandali (supra) is distinguishable on these facts, hence we do not accept the ratio laid down in the said decision.

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. (ii) The second argument made by Ld. CIT-DR that one has to follow the judicial discipline and judgment of the Jurisdictional High Court should be given importance and it should be followed invariably, for that, the ld. D.R. for the Revenue relied on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Thane Electricity Supply Ltd.(1994) 206 ITR 727. In this context, we state that assessing officer has thoroughly followed the judicial discipline, as we have explained above that the judgment of the Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana (supra) does not apply to the assessee under consideration and therefore the view taken by the assessing officer is plausible view and sustainable in law.Therefore, in fact, the assessing officer has followed the judicial discipline as mentioned in the judgement of Thane Electricity Supply Ltd. (supra), therefore, the plea raised by the ld. D.R. for the Revenue is hereby rejected. (iii) The third argument advanced by Ld. CIT-DR for the Revenue is that assessing officer, no doubt, issued the notice u/s. 142(1) of the Act to conduct inquiry and assessee has submitted the reply in response to that notice, however, the assessing officer has not applied his mind that deduction u/s 80P(2)(d) of the Act is not available in respect of interest received from co-operative bank. In this context, we state that assessing officer after taking the details and evidences from the assessee, has examined thoroughly and taken a plausible view that deduction u/s. 80P(2)(d) of the Act is available to the assessee under consideration in view of the old decisions of the Hon’ble Gujarat High Court in the case of Sabarkantha District Co- operative Milk Producers Union Ltd (supra) and in the case of Surat Vankar Sahakari Sangh Ltd. (supra), as these judgments were not overruled by the Hon’ble Gujarat High Court by constituting larger Bench and not distinguished in the latest judgment in the case of Katlary Karayana(supra). (iv) The fourth argument of Ld. CIT-DR is that Hon’ble Gujarat High Court in the case of Katlary Karayana (supra) has followed the judgment of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd., 108 Taxman 282 (SC) which clearly states that co-operative banks are not species of genus of co-operative society. In this context, we note that the judgment of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd(supra) is in the context of where the assessee retained sale proceeds of members whose produce was marketed by it and since funds created by such retention were not required immediately for business purpose, it invested same in specified securities and earned interest thereon. Therefore, interest earned by assessee would come in category of 'Income from other sources' and taxable under section 56 of the Act and would not qualify for deduction as business income under section 80P(2)(a)(i) of the Act. Therefore, the above judgement, of Hon’ble Supreme Court in the case of Totgars Co-operative Sale Society Ltd (supra) does not relate to section 80P (2) (d) of the Act, rather it relates to section 80P(2)(a)(i) of the Act, hence, does not apply to the assessee under consideration.Therefore,we find that the above decision in the case of Totgars Co-operative Sale Society Ltd(supra) is in the context of Section 80P(2)(a)(i) of the Act and is distinguishable and has been distinguished by lower courts in many judgements which are reproduced below: (a) Peroorkada Service Co-operative Bank Ltd. (2022) 442 ITR 141 (Kerala HC) (b) Totagars Co-operative Sale Society (2017) 392 ITR 74 (Karnataka HC)

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. (c) Vavveru Co-operative Rural Bank Ltd. (2017) 88 taxmann.com 728 (Andhra Pradesh and Telangana HC) (d) State Bank of India vs Commissioner of Income-tax (2016) 389 ITR 578 (Guj. HC); (e) The Uttar Gujarat Uma Co-op. Credit Society Ltd. in ITA Nos. 1670, 1671/A/2018 dated 28-02-2019 (Ahmedabad Trib.) (v) The fifth argument advanced by Ld. CIT-DR, is that the Co-ordinate Bench of ITAT, Rajkot, (Tribunal) has not considered the ratio of the Hon’ble jurisdictional High Court in the case of Katlery Karyana (supra), in the following recent judgments of ITAT, Rajkot, which are reproduced below: (i) Kutch District Co-operative Milk Producers Union Ltd., 159 taxmann.com 347, order dated 29.01.2024 (ii) Rajkot Jilla Sahakari Kharid Vechan Sangh Limited, in ITA No.49/Rjt/2022, order dated 09.208.2023 (iii) Shree Keshav Co-operative Credit Society Ltd., in ITA No.26/Rjt/2022, order dated 31.05.2022 The ld DR pointed out that in accordance with the decision of Hon`ble Supreme Court in the case of ACIT, Rajkot Vs. Saurashtra Kutch Stock Exchange Ltd, dated 15/09/2008, (2008) 173 Taxman 322 (SC), wherein amongst others, it was held that non-adherence to orders of Jurisdictional High Court and Supreme Court is a mistake apparent on record, therefore, the above orders of the jurisdictional Tribunal require rectification under section 254 (2) of the Act.In this regard, we find that the Co-ordinate Bench of Rajkot, in the above decisions, has clearly considered the oldjudgments rendered by the Hon’ble Jurisdictional, Gujarat High Court, namely, (i) Surat Vandar Sahakari Sangh Ltd(Supra) and (ii) Sabarkantha District Co-operative Milk Producers’ Union Ltd. (supra), these two old judgements, were not overruled and distinguished by the jurisdictional High Court of Gujarat, in the latest judgement of Hon`ble Gujarat High Court in the case of Katlary Karayana(supra), therefore, ratio of these two old judgements are equally applicable to the assessee under consideration. Moreover, the latest judgement of Hon`ble Gujarat High Court, in the case of Katlary Karayana (supra) is in the context of section 194A of the Act and section 147 of the Act, wherein the Hon’ble High Court has examined whether income has escaped assessment or not. Therefore, we note that above decisions of the Co-ordinate Bench, are speaking and reasoned decisions and hence, do not require rectification under section 254(2) of the Act, as judicial discipline has been observed in these above decisions, by following the old jurisdictional, Gujarat High Court judgements(supra), which are direct on the issue under consideration, hence we reject the plea taken by ld DR for the revenue. 37. We also state that the Co-ordinate Bench of ITAT, Banglore and Co-ordinate Bench of ITAT, Jaipur, have also followed the old judgments of the Hon’ble Gujarat High Court, as noted above, and held that interest received from Cooperative Banks are allowable deduction under section 80P(2) (d) of the Act:

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. (i) Totagars Co-operative Sale Society Ltd., in ITA No.376 to 379/Bang/2023, dated 18.07.2023 (ii) Jhunjhunu KaryaVikryaSahakari Samiti Ltd., ITA No.150/Jp/2022 We also note that the other Hon’ble High Courts, in the following cases, have upheld the same view, as the view taken by the Hon’ble Gujarat High Court in the old Judgments (supra), that interest received from Cooperative Banks are allowable deduction under section 80P(2) (d) of the Act: (i) Totagars Co-operative Sale, 79 taxmann.com 169 (Karnataka) (ii) Thorapadi Urban Co-operative Credit Society Ltd., 156 taxmann.com 419 (Mad.) 38. Final word: Thus, we note that the judgement of the Hon’ble Supreme Court in the case of Tatgars Society Ltd. (supra) does not apply to the assessee under consideration, as this judgment is in the context of Section 80P(2)(a)(i) of the Act. We find that the assessing officer, during the assessment proceedings has followed the judgment of the Hon’ble Jurisdictional Gujarat High Court in the case of Sabarkantha District Co-operative Milk Producers Union Ltd (supra) and in the case of Surat Vankar Sahakari Sangh Ltd, (supra) has taken a plausible view, which is sustainable in the eye, law. The assessing officer has not considered the judgement of Hon’ble Gujarat High Court in the Katlary Karayana (supra), as the ratio laid down by the Hon’ble Gujarat High Court in the case of Katlary Karayana(supra)is not applicable to the assessee, under consideration and hence there is no violation of the principles laid down by the Hon’ble Supreme Court in the case of Saurastra Kutch Stock Exchange Ltd. (supra).We are of the view that the judgement of the Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra), is not binding on the assessing officer, as we have stated that this judgement is in different context of section 194A of the Act and specially it is in the context of income escaped assessment u/s 147 of the Act, therefore, the ratio of the judgement does not apply to the assessee, under consideration. So far as the judicial discipline is concerned, there is no violation of the judicial discipline, by the assessing officer. Considering the above facts and circumstances, we state that during the assessment proceedings, the assessing officer made enough inquiry by issuing notice u/s 142(1) of the Act and in response to the notice of the assessing officer, the assessee submitted details, documents and explanation before the assessing officer and the assessing officer having examined the details and documents of the assessee, has taken the plausible view, which is sustainable in the eyes of law, as we have explained above. The Ld. PCIT while exercising the jurisdiction u/s 263 of the Act, also referred Clause (d) of Explanation – 2 of Section 263 of the Act wherein it is stated that if the order has not been passed by the Assessing Officer in accordance with any decision which is prejudicial to the assessee and rendered by the jurisdictional High Court or Supreme Court in the case of assessee or any other person.However, as we have explained above that the said judgment delivered by the Hon’ble jurisdictional Gujarat High Court in the case of Katlery Karayana (supra), does not apply to the assessee under consideration, hence Clause (d) of Explanation – 2 of Section 263 of the Act, does not apply to the assessee. Therefore, considering these facts, the Assessing Officer has taken a plausible view which is sustainable in the eye of law, as per the ratio laid down by the Hon’ble Apex Court in the case of Malabar Industries

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. (supra).Since the order of the Assessing Officer cannot be held to be erroneous as well as prejudicial to the interest of the revenue, in the facts and circumstances, narrated above, the usurpation of jurisdiction exercising revisional jurisdiction by the Principal CIT is ‘’null’’ in the eyes of law and, therefore, we are inclined to quash the very assumption of jurisdiction to invoke revisional jurisdiction u/s 263 by the Principal CIT. Therefore, we quash the order of the Principal CIT dated 10.03.2023, being ab initio void.”

Order is pronounced in the open court on 01/06/2026.

Sd/- (Dr. Arjun Lal Saini) लेखा सद�य/Accountant Member Surat Date: 01/06/2026 Copy of the order forwarded to :  The assessee  The Respondent  CIT  The CIT(A)  DR, ITAT, Surat  By order Guard File //True Copy// Assistant Registrar/Sr. PS/P.S. ITAT, Surat

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