The PCIT revised my assessment saying a co-operative bank is not a co-operative society. Is that right?
Not on the Gujarat view. A co-operative bank is itself a co-operative society registered under the State Co-operative Societies Act, so it falls within 'any other co-operative society' in s.80P(2)(d); the interest was deductible and the s.263 revision was set aside.
Decided by the High Court (Gujarat High Court — Justice Bhargav D. Karia and Justice Pranav Trivedi (R/Tax Appeal No. 154 of 2025)) on 2025-06-17, reported as [2025] 176 taxmann.com 71 (Gujarat); R/Tax Appeal No. 154 of 2025; Neutral Citation C/TAXAP/154/2025. It bears on section 80P, section 80P(2)(d), section 80P(4), section 263 of the Income Tax Act 1961, in Co-operative Societies and Deductions & Disallowances matters.
This is the pro-assessee side of the s.80P(2)(d) split and the case to lead with where the Gujarat view applies. It also answers the s.80P(4) objection head on: that exclusion bites on a co-operative bank claiming on its own income, not on a society depositing with it. It is equally useful against a s.263 revision founded only on the words of clause (d).
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee, a registered co-operative society supplying fertiliser, seeds and equipment to its members, filed its return for assessment year 2018-19 on 30 July 2018 declaring nil income and claiming deduction of Rs. 14,62,68,953 under s.80P. On limited scrutiny the Assessing Officer, by order dated 2 February 2021 under s.143(3), assessed income at Rs. 7,72,10,305 by disallowing Rs. 71,38,435 of the s.80P claim relating to interest from PGVCL and interest on refund; he left undisturbed the deduction under s.80P(2)(d) for bank interest and dividend received from the Rajkot District Co-operative Bank. An Internal Audit Party then objected that the s.80P(2)(d) deduction on the co-operative bank income had been wrongly allowed, and on that footing the Principal Commissioner passed an order under s.263 on 24 March 2023 holding the assessment erroneous and prejudicial to the revenue, on the ground that clause (d) covers interest from other co-operative societies and not from co-operative banks. The Tribunal, Rajkot Bench, quashed that order on 5 September 2024 in ITA No. 131/RJT/2023, and the revenue appealed under s.260A.
The revenue's appeal was dismissed and the question answered in favour of the assessee (para 6). The Court held that s.80P(2)(d) applied on these facts and that the Principal Commissioner was not justified in invoking s.263, because the twin conditions - that the assessment be erroneous and prejudicial to the interests of the revenue - were not satisfied; the Tribunal had rightly reversed the revision, holding that the co-operative bank is a co-operative society registered under the Gujarat State Co-operative Societies Act (para 5). The Court decided the point by following its own earlier decision in Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), on the basis that the question was no longer res integra in Gujarat (para 4).
The Court's own reasoning occupies paras 4 to 6 and is short. Counsel for the appellant-revenue himself pointed out that the eligibility of interest earned from investment with a co-operative bank for deduction under s.80P(2)(d) was no longer res integra in Gujarat after Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), and the Court set that decision out at length (para 4). On that footing it held that s.80P(2)(d) applied and that the s.263 revision failed because neither limb of the twin condition was met - the assessment could not be called erroneous where it accorded with the Court's own decisions (para 5). The extended discussion in the judgment - that s.80P is a beneficial provision to be read liberally, that s.80P(4) excludes only co-operative banks which require a Reserve Bank licence and does not disentitle a depositing society under clause (d), and that the amendment to s.194A(3)(v) does not take co-operative banks out of the definition of co-operative societies - is the Court reproducing paras 28 to 32 of Ashwinkumar Arban, which in turn quotes the Supreme Court in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and Mavilayi Service Co-operative Bank. That analysis is where the substance lies, but it is quoted material, not this Bench's own composition.
we are of the opinion that the provisions of section 80P(2)(d) is applicable in the facts of the case and the Principal Commissioner of Income-Tax, Rajkot was not justified in invoking revisional powers under section 263 of the Act
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Handle my notice → Ask a CA on WhatsAppNot on the Gujarat view. A co-operative bank is itself a co-operative society registered under the State Co-operative Societies Act, so it falls within 'any other co-operative society' in s.80P(2)(d); the interest was deductible and the s.263 revision was set aside. This was decided by the High Court (Gujarat High Court — Justice Bhargav D. Karia and Justice Pranav Trivedi (R/Tax Appeal No. 154 of 2025)) and bears on section 80P, section 80P(2)(d), section 80P(4), section 263 of the Income Tax Act 1961. It is reported as [2025] 176 taxmann.com 71 (Gujarat); R/Tax Appeal No. 154 of 2025; Neutral Citation C/TAXAP/154/2025. This is the pro-assessee side of the s.80P(2)(d) split and the case to lead with where the Gujarat view applies. It also answers the s.80P(4) objection head on: that exclusion bites on a co-operative bank claiming on its own income, not on a society depositing with it. It is equally useful against a s.263 revision founded only on the words of clause (d). If it applies to you, the first step is this: Produce the depositee bank's registration under the State Co-operative Societies Act to bring it within 'any other co-operative society'.
The assessee, a registered co-operative society supplying fertiliser, seeds and equipment to its members, filed its return for assessment year 2018-19 on 30 July 2018 declaring nil income and claiming deduction of Rs. 14,62,68,953 under s.80P. On limited scrutiny the Assessing Officer, by order dated 2 February 2021 under s.143(3), assessed income at Rs. 7,72,10,305 by disallowing Rs. 71,38,435 of the s.80P claim relating to interest from PGVCL and interest on refund; he left undisturbed the deduction under s.80P(2)(d) for bank interest and dividend received from the Rajkot District Co-operative Bank. An Internal Audit Party then objected that the s.80P(2)(d) deduction on the co-operative bank income had been wrongly allowed, and on that footing the Principal Commissioner passed an order under s.263 on 24 March 2023 holding the assessment erroneous and prejudicial to the revenue, on the ground that clause (d) covers interest from other co-operative societies and not from co-operative banks. The Tribunal, Rajkot Bench, quashed that order on 5 September 2024 in ITA No. 131/RJT/2023, and the revenue appealed under s.260A. The matter was decided on 2025-06-17 by the High Court (Gujarat High Court — Justice Bhargav D. Karia and Justice Pranav Trivedi (R/Tax Appeal No. 154 of 2025)). On those facts the High Court held as follows. The revenue's appeal was dismissed and the question answered in favour of the assessee (para 6). The Court held that s.80P(2)(d) applied on these facts and that the Principal Commissioner was not justified in invoking s.263, because the twin conditions - that the assessment be erroneous and prejudicial to the interests of the revenue - were not satisfied; the Tribunal had rightly reversed the revision, holding that the co-operative bank is a co-operative society registered under the Gujarat State Co-operative Societies Act (para 5). The Court decided the point by following its own earlier decision in Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), on the basis that the question was no longer res integra in Gujarat (para 4).
The Court's own reasoning occupies paras 4 to 6 and is short. Counsel for the appellant-revenue himself pointed out that the eligibility of interest earned from investment with a co-operative bank for deduction under s.80P(2)(d) was no longer res integra in Gujarat after Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), and the Court set that decision out at length (para 4). On that footing it held that s.80P(2)(d) applied and that the s.263 revision failed because neither limb of the twin condition was met - the assessment could not be called erroneous where it accorded with the Court's own decisions (para 5). The extended discussion in the judgment - that s.80P is a beneficial provision to be read liberally, that s.80P(4) excludes only co-operative banks which require a Reserve Bank licence and does not disentitle a depositing society under clause (d), and that the amendment to s.194A(3)(v) does not take co-operative banks out of the definition of co-operative societies - is the Court reproducing paras 28 to 32 of Ashwinkumar Arban, which in turn quotes the Supreme Court in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and Mavilayi Service Co-operative Bank. That analysis is where the substance lies, but it is quoted material, not this Bench's own composition. In the words reproduced by the source cited on this page: "we are of the opinion that the provisions of section 80P(2)(d) is applicable in the facts of the case and the Principal Commissioner of Income-Tax, Rajkot was not justified in invoking revisional powers under section 263 of the Act" The decision followed or applied Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat)(HC).
It was decided by the High Court on 2025-06-17 and is reported as [2025] 176 taxmann.com 71 (Gujarat); R/Tax Appeal No. 154 of 2025; Neutral Citation C/TAXAP/154/2025. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80P, section 80P(2)(d), section 80P(4), section 263, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The revenue's appeal was dismissed and the question answered in favour of the assessee (para 6). The Court held that s.80P(2)(d) applied on these facts and that the Principal Commissioner was not justified in invoking s.263, because the twin conditions - that the assessment be erroneous and prejudicial to the interests of the revenue - were not satisfied; the Tribunal had rightly reversed the revision, holding that the co-operative bank is a co-operative society registered under the Gujarat State Co-operative Societies Act (para 5). The Court decided the point by following its own earlier decision in Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), on the basis that the question was no longer res integra in Gujarat (para 4). It arises in Co-operative Societies and Deductions & Disallowances matters, on section 80P, section 80P(2)(d), section 80P(4), section 263 of the Income Tax Act 1961, and was decided by Gujarat High Court — Justice Bhargav D. Karia and Justice Pranav Trivedi (R/Tax Appeal No. 154 of 2025). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Answer a s.80P(4) objection by showing the exclusion operates against the bank's own claim, not against the depositing society. Where the proceeding is under s.263, argue that a view supported by High Court authority cannot be treated as an unsustainable one.
Validity check could not be completed. No later decision applying, following or affirming this judgment was found: the full report carries no citator entry, and nothing recording an SLP, a stay or a reversal appears either. What the judgment does establish is that the proposition it applies is settled in Gujarat by an earlier line of the same Court - Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), which in turn rests on the Supreme Court in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and Mavilayi Service Co-operative Bank. Ashwinkumar Arban also cites the same Court's decision in Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v. ACIT [2022] 140 taxmann.com 602 (Gujarat) as supporting deduction; that decision has been read and in fact applied the Karnataka view in Totagars against the assessee (its paras 13-14), so the Gujarat line is not internally consistent on that point. For the Gujarat position, cite Ashwinkumar Arban as the substantive authority and this case as the recent application. The conflict with the Karnataka High Court in Pr. CIT v. Totagars Co-operative Sale Society (2017) 395 ITR 611 remains unresolved on the material read. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
Three cautions before citing this. First, the substantive Gujarat authority on s.80P(2)(d) is Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), which this judgment follows; the analysis usually attributed to this case - s.80P as a beneficial provision, the limits of s.80P(4), the effect of the s.194A(3)(v) amendment - appears here only as a block quotation from Ashwinkumar Arban and, inside that, from the Supreme Court in Kerala State Co-operative Agricultural and Rural Development Bank Ltd. and Mavilayi Service Co-operative Bank. Second, what this Court decided is that the s.263 revision failed for want of the twin conditions; the deduction point was treated as no longer res integra, and that submission was made by counsel for the revenue itself. Only the appellant was represented at the hearing. Third, the revenue's proposed question [C] cited the same Court's decision in Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v. ACIT [2022] 140 taxmann.com 602 (Gujarat) as holding that interest on surplus funds placed with co-operative banks is not deductible, while Ashwinkumar Arban reads Katlary as supporting deduction. Katlary Kariyana Merchant Sahkari Sarafi Mandali Ltd. v. ACIT [2022] 140 taxmann.com 602 (Gujarat), decided 4 January 2022, has been read: at paras 13 and 14 it relied on the Karnataka decision in Pr. CIT v. Totagars Co-operative Sale Society (2017) 395 ITR 611 for the proposition that interest from a bank which is not a co-operative society is not deductible under s.80P(2)(d), and it upheld a reopening on that basis - against the assessee. Ashwinkumar Arban's reading of Katlary as supporting deduction is therefore hard to reconcile with what Katlary decided, and the Gujarat position is not internally consistent. Check Katlary itself before citing it either way. Live conflict remains with the Karnataka High Court in Pr. CIT v. Totagars Co-operative Sale Society (2017) 395 ITR 611, also in this library, so which way the claim goes depends on which High Court binds your assessment. The judgment does not say how much of the deduction related to the co-operative bank interest and dividend as against the rest of the s.80P claim. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The revenue's appeal was dismissed and the question answered in favour of the assessee (para 6). The Court held that s.80P(2)(d) applied on these facts and that the Principal Commissioner was not justified in invoking s.263, because the twin conditions - that the assessment be erroneous and prejudicial to the interests of the revenue - were not satisfied; the Tribunal had rightly reversed the revision, holding that the co-operative bank is a co-operative society registered under the Gujarat State Co-operative Societies Act (para 5). The Court decided the point by following its own earlier decision in Pr. CIT v. Ashwinkumar Arban Cooperative Society Ltd. [2024] 168 taxmann.com 314 (Gujarat), on the basis that the question was no longer res integra in Gujarat (para 4).
Every entry in this library links to where it was found, so you can check it yourself rather than take our word for it.
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