GUJARAT REFINERY COOPERATIVE CREDIT SOCIETY LIMITED,VADODARA vs. ASSESSING OFFCIER, VADODARA

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ITA 488/AHD/2026Status: DisposedITAT Ahmedabad15 October 2026AY 2022-236 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal allowed the ground raised by the assessee, respectfully following the decision of the Hon’ble jurisdictional High Court in PCIT Vs. Ashwinkumar Arban Co-Operative Society Ltd. The High Court held that a cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act, and therefore, interest earned by an assessee cooperative society from investment made with such a cooperative bank is eligible for deduction under Section 80P(2)(d). The High Court further clarified that the exclusion of applicability of Section 80P to cooperative banks by Section 80P(4) does not disentitle an assessee from claiming deduction under Section 80P(2)(d) in the absence of any amendment to that specific section. The High Court also distinguished the reliance placed by the revenue on decisions of the Karnataka High Court and the Supreme Court in the case of Totgars’ Cooperative Sale Society, noting that those decisions might have considered amendments to Section 194A(3)(v) which do not exclude cooperative banks from the definition of cooperative societies for the purpose of Section 80P. The Tribunal found that the conditions for invoking revisional powers under Section 263, as per the High Court's judgment, were not fulfilled. The operative direction was to allow the ground raised by the assessee.

What were the facts?

The assessee, Gujarat Refinery Cooperative Credit Society Limited, filed an appeal against the order dated 28.06.2024 passed by the National Faceless Appeal Centre (NFAC), Delhi, for Assessment Year 2022-23. The assessee, a cooperative society providing credit facilities to its members (employees of Gujarat Refinery Limited), claimed a deduction of Rs. 23,17,430/- under Section 80P(2)(a)(i) of the Income-tax Act, 1961, on interest earned from advances to members. During scrutiny, the assessee could not respond to certain notices due to the hospitalization of its consultant. The Assessing Officer, overlooking submitted documents, raised a demand of Rs. 8,96,020/-. The appeal before the CIT(A) also resulted in an ex-parte order confirming the demand, again due to the consultant's inability to attend hearings. The assessee subsequently received the order on 21.01.2026 and filed the present appeal.

What were the issues?

1. Whether the income of the assessee, a credit cooperative society providing credit facilities to its members, is eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961. The assessee contends that its income is derived from providing credit facilities to its members, which is specifically covered by Section 80P(2)(a)(i) and therefore, fully exempt. The revenue's position is not explicitly recorded in the judgment regarding this specific ground, but the demand raised implies a disallowance of the claimed deduction. 2. Whether interest on an Employees Gratuity Fixed Deposit with a bank is chargeable to tax. The assessee states this interest is not specified income eligible for deduction and has offered it to tax, depositing the tax amount. The revenue's stance on this point is not recorded. 3. Whether a cooperative bank is treated as a cooperative society for the purpose of allowing deduction under Section 80P(2)(d) of the Act. The assessee relies on the jurisdictional High Court's decision in PCIT Vs. Ashwinkumar Arban Co-Operative Society Ltd. The revenue, in the cited High Court case, argued that cooperative banks are excluded from the definition of cooperative societies and that Section 80P(4) disentitles them from claiming deductions.

Which sections of the Income-tax Act were involved?

Section 80P,Section 80P(2)(a)(i),Section 80P(2)(d),Section 80P(4),Section 250,Section 142(i),Section 263,Section 194A(3)(v)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

For Appellant: Shri Janardan Tamboli, A.R
For Respondent: Shri Amit Pratap Singh, Sr.DR
Hearing: 15.09.2026Pronounced: 15.10.2026

PER DR. B.R.R. KUMAR, VICE-PRESIDENT:

- Delay Condoned This appeal has been filed by the Assessee against the order dated 28.06.2024 passed by the National Faceless Appeal Centre(NFAC), Delhi (hereinafter referred to as ‘Ld. CIT (A)’ in short), under Section 250 of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’ in short) for Assessment Year 2022-23. ITA No. 488/AHD/2026, AY-2022-23 - 2–

2.

The Assessee has raised the following grounds of Appeal: -

1.

The appellant craves leave to add, to amend or to modify the grounds in above raised. The society is employee's co-operative society engaged in carrying on business of providing credit facilities to its members. These members are exclusive employees of Gujarat Refinery Limited. hence the income of credit cooperative society is totally exempted u/s 80(p)(2)(a)(i) The Interest on advance received from members of cooperative credit society is a specified income and eligible for deduction u/s 80P. The deduction amounting Rs. 23,17,430/- was claimed in the return of income of the appellant.

2.

The interest on Employees Gratuity FD with bank received is not a specified income and it is chargeable to tax, thus the proportionate interest on Bank FD received is charged to tax. The amount of tax was deposited by the appellant. For your reference the working for 80P deduction and computation of income is enclosed below.

3.

As the assessing officer processed our return he selected our case for scrutiny and asked for submission of information and documents u/s142(i). the required documents and workings were submitted to the officer for the genuineness of the claim of the deduction in the return of income tax.

4.

But, the assessing officer overlooked the submitted documents and working and issue various notices. As our CA was unwell and hospitalized we were unable to respond timely. This caused the assessing officer to issue the closure order against the scrutiny by raising the demand amounting Rs. 8,92,020/-

5.

We also filed an appeal with CIT (A) to get a conclusion and to drop the demand. Due to aforesaid reason again our CA was unable to attend the hearings physically or electronic or to seek a formal adjournment. This resulted in an ex-parte order passed by the CIT(A) on 26th June 2024, confirming the demand of Rs. 8,96,020 without a merit-based review of the documents.

6.

As appellant came to know about the order through the income tax notice on 21/01/2026 we responded with all the supporting documents and workings necessary to claim genuineness of the deduction claimed.

3.

Brief facts of the case are that assessee is Gujarat Refinery Credit Cooperative Society, a registered cooperative society established on - 3– 22.01.1980 for the employees of Gujarat Refinery. The society operates on a mutual basis, collects savings from its members and provides credit facilities exclusively to them. Its income is mainly earned from the difference between interest received and interest paid and is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, subject to the applicable conditions. For A.Y. 2022-23, the assessee filed its return declaring total income of Rs.18,453/-. During scrutiny proceedings, the assessee furnished the requisite details and documents. However, it could not respond to certain subsequent notices as its consultant was hospitalized following an accident and knee replacement surgery. Upon resuming duty, the consultant responded to the show-cause notice dated 08.03.2024 and furnished the required explanation and workings. The Assessing Officer, however, did not consider the submissions and documents furnished by the assessee and completed the assessment, raising a demand of Rs.8,96,020/-. The assessee preferred an appeal before the CIT(A). Due to the continued health complications and post- operative recovery, the assessee could not attend the appellate proceedings, resulting in an ex-parte order dated 26.06.2024 confirming the demand without adjudicating the issues on merits.

Deduction u/s.80P(2)(d) of I.T Act.

4.

The issue before us is to determined whether the co-operative bank is also treated as co-operative societies for the purpose of allowing deduction u/s.80P(2)(d) of the Act. This issue stands settled by the order of the jurisdictional High Court in the case of PCIT Vs. Ashwinkumar Arban Co-Operative Society Ltd, [2024] 168 taxmann.com 314 (Gujarat).

- 4– For the sake of ready reference, snippets of the said order is reproduced below:-

“Section 80P, read with section 263 of the Income-tax Act, 1961 Deductions Income of co-operative societies (Interest from co- operative bank) Assessment year 2018-19- Principal Commissioner invoked revisional powers under section 263 on ground that Assessing Officer had allowed deduction on interest earned by assessee, a cooperative society, from investment made with a cooperative bank under section 80P(2)(d) which was erroneous and prejudicial to Interest of revenue Tribunal reversed Principal Commissioner's order holding that cooperative bank was a cooperative society registered under Gujarat State Cooperative Societies Act and, therefore, interest earned by assessee from said bank was eligible for deduction under section 80P(2)(d) - Whether deduction under section 80P(2)(d) is available to cooperative societies on income earned as interest on investment made with cooperative bank which in turn, is a cooperative society itself - Held, yes - Whether exclusion of applicability of section 80P to cooperative banks by section 80P(4) would not disentitle assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in said section - Held, yes - Whether thus, provisions of section 80P(2)(d) would be applicable to instant case and Principal Commissioner was not justified in invoking revisional powers under section 263 which was rightly reversed by Tribunal - Held, yes [In favour of assessee)

***  The controversy sought to be canvassed with regard to deduction under section 80P(2)(d) is no more res integra in view of the decision of this Court in case of Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v Asstt. Commissioner of Income Tax [2022] 140 taxmann.com 602 (Guj.) as well as in case of State Bank of India v Commissioner of Income Tax (2018) 389 ITR 578 (Guj.) wherein it was held that the deduction under section 80P(2)(d) is available to the cooperative societies on the income earned as interest on the investment made with the cooperative bank which in turn, is a cooperative society itself. [Para 28]

 Reliance placed by the revenue on decisions of the Karnataka High Court in Totgars’ Cooperative Sale Society (2017) 395 ITR 611 and Supreme Court in case of Totgars Cooperative Sale Society Ltd v. Income Tax Officer 322 ITR 283 (S.C), the Karnataka High Court appears to have taken into consideration the amendment in section 194A(3)(v) wherein the cooperative bank is excluded from the applicability of tax to be deducted at source. However, it appears - 5– that the interpretation made by the Karnataka High Court to the effect that the cooperative banks have been excluded from the definition of the cooperative societies by Finance Act, 2015 by amending section 194A(3)(v) is concerned, on perusal of section 194A (3), it appears that it provides for exemption from deducting Tax Deducted at Source from the income on interest other than interest on securities as the cooperative societies other than cooperative banks meaning thereby that the cooperative banks are liable to deduct TDS from the interest other than interest on securities. Therefore it cannot be said that cooperative banks are excluded from the definition of cooperative societies by such an amendment. [Para 29]

 Moreover, as reliance placed on the aforesaid decision for applicability of section 80P(4) in the facts of the case is also not possible to accept as section 80P(4) would be applicable to the cooperative bank when the cooperative bank is liable to pay tax under the provisions of the Act and in such eventuality, the provision of section 80P would not be applicable as per the amendment of sub-section (4) of section 80P. Therefore, the exclusion of applicability of section 80P to cooperative banks by section 80P (4) would not disentitle the respondent-assessee from claiming deduction under section 80P(2)(d) in absence of any amendment in the said section and that would not be sufficient to deny the claim of the respondent-assessee for deduction of interest earned from investment made in a cooperative bank which is also a cooperative society from the total income. [Para 30]

 The Apex Court in case of Kerala State Co-operative Agricultural & Rural Development Bank Ltd. v. Assessing Officer in 458 ITR 184 while considering various provisions of the Banking Regulation Act read with provisions of the Income Tax Act has held that the provision of section 80P(4) would not be applicable to a cooperative bank which is not a bank as per the provisions of the Banking Regulation Act, 1949.[Para 31]

 In view of the above the provisions of section 80P(2)(d) would be applicable in the facts of the case and the Principal Commissioner was not justified in invoking revisional powers under section 263 which is rightly reversed by the Tribunal holding that the cooperative bank is a cooperative society registered under the Gujarat State Cooperative Societies Act and in view of the various decisions of the Court, the Tribunal after following the same has come to the conclusion that the assessment was not erroneous allowing deduction of section 80P(2)(d) which is in consonance with the various decisions of the Court as a twin condition invoking section 263 as to the assessment being erroneous and prejudicial to the interest of the revenue are not being fulfilled. [Para 33]

- 6–

 In view of the foregoing reasons the question is answered in favour of the assessee and against the revenue. Tax Appeals being devoid of any merit are dismissed [Para 34].”

Respectfully following the decision of the Hon’ble jurisdictional High Court, the ground raised by the assessee in this appeal is hereby allowed.

The order pronounced in the open Court on 15.10.2026. (DR. B.R.R. KUMAR) VICE-PRESIDENT) () Ahmedabad; Dated 15.10.2026

आदेश की "ितिलिप अ"ेिषत / Copy of the Order forwarded to : 1. अपीलाथ"/ The Appellant

2.

""थ"/ The Respondent. 3. संबंिधतआयकरआयु"/ Concerned CIT 4. आयकरआयु"(अपील) /The CIT(A)- 5. िवभागीय"ितिनिध, आयकरअपीलीयअिधकरण, अहमदाबाद/ DR, ITAT, Ahmedabad 6. गाड"फाईल /Guard file. आदेशानुसार/ BY ORDER,सहायकपंजीकार (Dy./Asstt.

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