The assessee herein Co-operative Society providing credit facilities by way of loans and advances to its members. For the Assessment Year, 2018-19, the assesse filed its Return of Income declaring Nil income, after claiming deduction u/s. 80P of the Act. The assessment was taken up for scrutiny and assessment order u/s. 143(3) of the Act was passed on 08-02-2021 accepting the returned ‘Nil’ income.  

On verification of records by PCIT, it was found that the assessee has shown Gross total income of Rs. 1,22,53,554/- on which deduction u/s. 80P of Rs. 1,22,53,554/- was claimed.

The assessee was issued a show cause notice, why the amount of Rs. 1.22 crores being interest from Co-operative Bank should not be disallowed by passing appropriate revisional order u/s. 263 of the Act following Hon’ble Supreme Court Judgment in the case of Totagars Cooperative Sale Society Ltd. Vs. ITO [2010] 322 ITR 283 (SC). Further this issue was not verified by the Assessing Officer without inquiring into the claim made by the assessee, therefore as per Explanation 2 to section 263 (1) of the Act, why the assessment should not be revised.  


M.K. Patel appearing for the assessee submitted that the issue regarding claim of deduction under section 80P was duly enquired by the Assessing Officer during the course of assessment proceedings. He further submitted that in response to the notices issued by the AO, the assessee filed submission wherein, the assessee submitted reasons as to why it is eligible for deduction under section 80P of the Act.


The division bench of Waseem Ahmed, Accountant Member and T.R. Senthil Kumar, Judicial Member said that 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.

The bench observed that the Karnataka High Court in Totagars Cooperative Sales Society (supra) 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 Cooperative Bank would necessarily be deductible under section 80P(1) of the Act.

It was further observed that the Co-ordinate Bench of Rajkot Tribunal in Surendarnagar District Co-operative Milk Producer Union Ltd. v. Dy. CIT 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. 

The Tribunal viewed that the order passed by the Assessing Officer is not erroneous, though it may be prejudicial to the interest of the Revenue. Therefore, the twin conditions that the assessment order is erroneous and so far as prejudicial to the interest of revenue, as prescribed under section 263 is not fulfilled in the present case. 

Case title: The Peoples Co-Op Credit Society Ltd. v/s The Pr.CIT

Citation: ITA No. 322/Ahd/2023

Amit Sharma

Author of Tax Concept

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