Loading judgment…
Facts
The assessee, a Cooperative Society, declared Nil income for AY 2020-21 after claiming a deduction of Rs. 56,07,235/- u/s.80P. The assessment was completed accepting the returned income. The PCIT invoked Section 263, holding the assessment order erroneous and prejudicial to revenue as the assessee claimed deduction for interest income earned from investments with cooperative banks.
Held
The Tribunal held that the issue regarding the allowability of deduction u/s.80P(2)(d) for interest income earned from cooperative banks is no longer res integra, with consistent decisions supporting the assessee's claim. The PCIT erred in invoking Section 263.
Key Issues
Whether the PCIT erred in invoking Section 263 to revise an assessment order where deduction u/s.80P(2)(d) for interest income from cooperative banks was allowed by the AO based on judicial precedents.
Sections Cited
263, 143(3), 144B, 80P, 80P(2)(d)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, PUNE BENCHES “A”, PUNE
Before: DR.MANISH BORAD & MS.ASTHA CHANDRA
आदेश / ORDER
PER DR. MANISH BORAD, ACCOUNTANT MEMBER :
The captioned appeal at the instance of assessee pertaining to A.Y.2020-21 is directed against the order dated 27.02.2025 of PCIT, Pune-4 passed u/s.263 of the Income- tax Act, 1961 (hereinafter also called ‘the Act’) arising out of Assessment Order dated 23.09.2022 passed u/s.143(3) r.w.s144B of the Act.
Assessee has raised following grounds of appeal :
“1. On the facts and in the circumstances of the case and in law, Ld. PCIT, Pune-4, erred in passing an order u/s.263 of IT Act, the action of Ld. PCIT is arbitrary and since the issue has attained finality and the assessment order does not contain any error, the order passed u/s 263 is void and accordingly, appellant prays to quash the order.
Lohagaon Nagri Sahakari Patsanstha Maryadit Your appellant craves for to add, alter amend, modify, delete any or all grounds of appeal before or during the course of hearing in the interest of natural justice.
3. Brief facts of the case are that the assessee is a Cooperative Society and Nil income declared for A.Y. 2020- 21 in the return filed on 12.01.2021 after claiming deduction u/s.80P of the Act at Rs.56,07,235/-. Assessment u/s.143(3) r.w.s.144B of the Act was completed accepting the returned income. Thereafter, ld. PCIT invoked section 263 of the Act raising the sole issue that assessee has claimed deduction u/s.80P of the Act for the interest income earned from investments with cooperative banks. Assessee gave detailed submissions before ld. Assessing Officer stating that in light of settled judicial precedents and the various decisions of this Hon’ble Tribunal ld. AO has accepted the contention of the assessee and allowed the deduction u/s.80P(2)(d) of the Act for the interest income earned from investments with cooperative banks. However, ld. PCIT was not satisfied with this reply and still held that the assessment order dated 23.09.2022 is erroneous and prejudicial to the interest of Revenue.
Now the assessee is in appeal before this Tribunal assailing the order of ld.PCIT.
Ld. Counsel for the assessee referring to the judgment of Hon’ble Bombay High Court in the Writ Petition No.14178/2023 order dated 28.03.2024 in the case of M/s. OM Siddhakala Associates Vs. DCIT submitted that Hon’ble Court has held that as per principle of judicial discipline, orders of highest Appellate Authorities should be followed unreservedly by the subordinate Authorities. He submitted Lohagaon Nagri Sahakari Patsanstha Maryadit that even when the various decisions of this Tribunal were putforth before ld. PCIT in support of the contention that valid claim u/s.80P(2)(d) has been made for the interest income earned from investments with cooperative banks, still ld. PCIT has passed the impugned order and therefore the same deserves to be quashed.
On the other hand, ld. Departmental Representative supported the order of ld.PCIT.
We have heard the rival contentions and perused the record placed before us. Assessee is aggrieved with the invocation of section 263 of the Act and the finding of ld. PCIT holding that the assessment order dated 23.09.2022 for A.Y. 2020-21 is erroneous and prejudicial to the interest of Revenue. Ld. AO erred in allowing the deduction u/s.80P(2)(d) of the Act at Rs.56,07,237/- for the interest income earned on investments with cooperative banks.
8. This issue is no longer res integra by virtue of catena of decisions taking consistent view that interest income earned from deposits with Cooperative Banks is eligible for deduction u/s.80P(2)(d) of the Act. Recently, this Bench in the case of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal Vs. ITO in order dated 07.05.2025 has allowed the deduction claimed by the assessee u/s.80P(2)(d) of the Act observing as under :
“5. We have heard the rival submissions and perused the record placed before us. There is no dispute to the fact that assessee has earned interest income of Rs.1,02,95,103/- from deposits/investments with Cooperative Banks. This fact has been accepted by the Assessing Officer in the assessment order also. Admittedly, assessee has not filed the requisite details before ld.CIT(A). We however considering the fact that the issue regarding allowability of deduction u/s.80P(2)(d) of the Act for the interest earned from Cooperative Banks is no longer res integra as the very same issue has been decided by this Tribunal in catena of decisions and in assesse’s own case for A.Y. 2020-21 holding that the assessee is eligible for deduction u/s.80P(2)(d) of the Act as the Cooperative Banks are basically Cooperative Societies. For the sake of brevity, the finding given in is reproduced below:
“7. We have heard both the sides and perused the record placed before us. In the instant case, the Assessing Officer disallowed the interest income of Rs.1,63,98,998/- earned out of the Fixed deposits/Investments made with Cooperative Banks treating the same as Income from Other Source. Ld.CIT(A) dismissed the appeal in limine without discussing anything on merits of the issues and on the ground that the assessee has not provided plausible explanation for admission of additional evidences.
Section 80P(2)(d) of the Act provides that the sum received in respect of any income by way of interest or dividend derived by Cooperative Society from its investment with any other Cooperative Society, the whole of such income is eligible for deduction u/s.80P of the Act. we find that this issue is no more res integra as the Coordinate Benches of this Tribunal has been consistently holding that the interest income earned out of the FDs/Investments kept with Cooperative Banks is allowable u/s.80P(2)(d) of the Act. We find that this Tribunal in case of Kolhapur District Central Co-op. Bank Kanista Sevakanchi Sahakar Pat Sanstha Ltd., Vs. ITO in dated 01.01.2024 dealing with similar issue after placing reliance on another decision of this Tribunal in the case of The Ugar Sugar Works Kamgar & Dr. Shirgaokar Shaikshanik Trust Nokar Co-op Credit Society vs. ITO in dated 27.05.2022 has held that the interest earned from deposits with Cooperative Banks are also eligible for deduction u/s.80P(2)(d) of the Act as Cooperative Banks are basically Cooperative Societies only but have turned into Bank on getting necessary banking license.
Respectfully following the above referred decisions taking consistent view along with considering the facts of the case, where the assessee made investment with the Cooperative Banks we hold that the assessee is eligible for deduction u/s.80P(2)(d) of the Act for the interest income earned from Cooperative Banks at Rs.1,63,98,998/-. Findings of the ld. CIT(A) is set-aside and the Assessing Officer is directed to allow the claim made by the assessee. Effective grounds of appeal raised by the assessee are allowed.”
Lohagaon Nagri Sahakari Patsanstha Maryadit 6. Respectfully following the same, we hold that deduction of Rs.1,02,95,103/- u/s.80P(2)(d) of the Act claimed by the assessee on the interest earned from deposits/Investments with Cooperative Banks deserves to be allowed. Relevant finding of ld.CIT(A) on merits is set aside and grounds of appeal No.5 to 8 raised by the assessee are allowed.”
9. Since the sole issue raised by ld.PCIT in the order u/s.263 of the Act stands already examined by the ld. Assessing Officer in light of settled judicial precedents where the claim of interest earned from investments with cooperative banks have been allowed, we are of the considered view that ld.PCIT erred in invoking section 263 of the Act. We therefore quash the impugned order and restore the assessment order dated 23.09.2022 passed by ld. Assessing Officer.
In the result, appeal of the assessee is allowed.
Order pronounced on this 25th day of August, 2025.