SURENDRANAGAR DISTRICT CO-OPERATIVE MILK PRODUCERS UNION LIMITED,SURENDARAGAR V. PRINCIPAL COMMISSIONER OF INCOME TAX, AHMEDABAD

ITA 315/RJT/2024

AI Insights

The case revolves around the appeal by Surendranagar District Co-operative Milk Producer Union Limited against the order of the Principal Commissioner of Income Tax (PCIT), which had directed the disallowance of deduction claimed under section 80P(2)(d) of the Income Tax Act, 1961. The PCIT's order was based on the grounds that the interest and dividend income received from cooperative banks were not eligible for deduction under the said section, referencing a decision by the Hon'ble Gujarat High Court. However, the Tribunal noted that there were conflicting decisions and interpretations regarding the applicability of such deductions, particularly in light of earlier judgments by the Gujarat High Court which supported the assessee's claim. The Tribunal ultimately decided in favor of the assessee, highlighting the need for a consistent application of judicial precedents and the importance of the specific context of each case.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 23038 (ITAT-RAJKOT)
• Duration Of Justice: 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-10-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 08-10-2024
• Assessment Year: 2018-2019
• Appeal Filed On: 10-05-2024
• Other Referred Cases: Shri Avadh Nagarik Sahkari Mandli Ltd. vs. Pr.CIT, Katlary Kariyana vs. PCIT, Lodhika Seva Sahkari Mandali Ltd vs. PCIT, Sabarkantha District Co-operative Milk Producers Union Ltd vs. PCIT, Surat Vankar Sahakari Sangh Ltd vs. PCIT, State Bank of India vs CIT, Totagars Co-operative Sale Society vs CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY PUNGLIA
• Assessee Lawyers: KALPESH DOSHI
• Keywords: Business income; Reopening of assessment; Principle of natural justice; Revision of order; Co-operative Credit Society
• Section: 147; 143(3); 142(1); 143(2); 143(1); 263; 254(2); 56; 194A; 80P; 2; 2(19)

Judgement Text

" 1 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT BENCH, RAJKOT BEFORE DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER AND SHRI DINESH MOHAN SINHA, JUDICIAL MEMBER आयकर अपील सं./ITA No.315/RJT/2024 (िनधाŊरण वषŊ / Assessment Year: (2018-19) (Physical Hearing) Surendranagar District Co- operative Milk Producers Union Limited Plot No.249, Phase-2, GIDC Market Yard Circle, Sursagar Dairy, Wadhwan Road, Wadhwan, Gujarat 363001 Vs. Principal Commissioner of Income Tax Ambawadi, Ahmedabad ˕ायीलेखासं./जीआइआरसं./PAN/GIR No.: AAAAS8375B (Appellant) (Respondent) Appellant by : Shri Kalpesh Doshi, AR Respondent by : Shri Sanjay Punglia, CIT-DR Date of Hearing : 08/10/2024 Date of Pronouncement : 16/10/2024 आदेश/ORDER PER DR. A. L. SAINI, AM: By way of this appeal, the assessee has challenged the correctness of the order passed by the Learned Principal Commissioner of Income Tax PCIT, Ahmedabad-3 [in short ‘the Ld. PCIT’], dated 15.03.2024, under section 263 of the Income tax Act, 1961 [hereinafter referred to as ‘the Act’] for the Assessment Year (AY) 2018-19. 2 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 2. The grounds of appeal raised by the assessee are as follows: “1. That the Ld. Principal CIT has wrongly invoked provisions of section 263 of the I.T. Act, 1961 and wrongly held that order passed by the AO is erroneous and prejudicial to the interest of the Revenue. The Ld. PCIT has travelled beyond jurisdiction and wrongly passed order u/s 263 of the I.T. Act 2. The Ld. PCIT has erred in invoking the revisionary powers by stating that the AO has failed to enquire and examine the deduction u/s 80P of the I. T. Act, 1961. 3. The Ld. PCIT has wrongly invoked explanation -2 to section 263 of the I.T. Act. 4. That, the Revision u/s 263 of the I. T. Act, 1961 is made on the basis incorrect legal provisions and therefore the order u/s 263 1. T. Act, 1961 is bad-in-law.” 3. The facts of the case which can be stated quite shortly are as follows: The assessee, before us, is a Co-operative society. On verification of case records, it was found by Learned Principal Commissioner of Income Tax, (PCIT) that the assessee has earned interest of Rs.2,80,09,562/- from investment in Co-operative Banks. Further, the assessee had also received dividend of Rs. 1,28,03,588/- from Co-operative Banks and claimed total deduction of Rs 4,08,13,150/- (Rs.2,80,09,562+ Rs. 1,28,03,588) u/s 8OP(2)(d) of the Income Tax Act. The assessee Society had claimed deduction u/s.80P(2)(d) of the Act of Rs.4,08,13,150/- on interest and dividend received. It was observed by Ld. PCIT that as per latest decision of Hon’ble Gujarat High Court, such interest income and dividend are not eligible for deduction u/s 80P(2)(d) of the Act. Therefore, Ld. PCIT held that order passed by the assessing officer (AO) is erroneous as well as prejudicial to the interest of the Revenue and, therefore, directed the 3 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT Assessing Officer to disallow the deduction under Section 80P(2)(d) of the Act. 4. Based on the above facts, learned Counsel for the assessee invited our attention to the order dated 31.07.2024, passed by the Division Bench of this Tribunal in the case of Shri Avadh Nagarik Sahkari Mandli Ltd. vs. Pr.CIT in ITA No.126/Rjt/2023 for the Assessment Year 2018-19 whereby the issue relating to deduction under Section 80P(2)(d) of the Act has been adjudicated in favour of the assessee. Learned Counsel for the assessee submitted that the present appeal is squarely covered by the aforesaid order of the Tribunal, a copy of which was also placed before the Bench. 5. Learned Departmental Representative, relied upon the orders of the authorities below and submitted written submission, which are reproduced below: “Submission as to why the order of Ld. ITAT, Rajkot in the matter of Avadh Nagarik Sahkari Mandali Ltd in ITA No.126/RJT/2023 may not be considered as a precedence in the matter of Sec.80P(2)(d) whereby the appellant have deposited their excess funds with co-operative banks which have been ceased to be a co-operative society from the date of receipt of approval from the RBI as a commercial bank :- 1. The decision in the case of Avadh Nagarik Sahkari Mandali Ltd neither discusses nor distinguishes the view of the Hon. Supreme Court that the commercial banks are not based on the Principle of Mutuality. Despite citing the decision of Hon. Supreme Court in the case of Secunderabad Club vs CIT in CIVL APPEAL NO(S), 5195-5201 OF 2012, order dated 17/08/2023(2023) 117 CCH 0114 ISCC, (2023) 334 CTR 0105 (SC), (2023) 457 ITR 0263 (SC), (2023) 295 TAXMAN 0123 (SC), Ld. ITAT has neither dealt with the issue of \"Privity of Mutuality\" nor discussed the factual matrix of the case of the appellant on the touchtone of principle of privity of mutuality. Hon. Supreme Court in their multiple decisions including the present decision have elaborately discussed that a commercial bank deals with a large number of customers. The dealings of 4 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT commercial bank is different from the operations of an entity which claims its income as exempt on the principle of privity of mutuality. In the case of the appellant as long as the transactions are limited amongst the Members, the privity of mutuality is maintained. The Revenue is not challenging the generation of surplus funds vide operations of mutuality. However, as and when the surplus funds of an entity which claims these to be governed by privity of mutuality is deposited in a commercial bank, the mutuality is lost. In this case the cooperative society has deposited its surplus fund in a cooperative bank. The cooperative bank has become equivalent to any other commercial bank by virtue of its operating license from the RBI. Ld.ITAT has not discussed this aspect which was strongly emphasised by the Revenue. Thus, the order of Ld.ITAT suffers from the defect of being sub-silentio to the contention of Revenue. In the matter of Dattani & Co, vs. ITO (2014) 41 Taxmann.com 360 (Guj) the Hon. High Court of Gujarat which happens to be the jurisdictional High Court for ITAT, Rajkot has ruled as follows:- \"Whenever any decision has been relied upon and/or cited by the assessee and/ or any party, the Tribunal is duty bound to consider and/or deal with the same and opine whether any facts and circumstances of particular case same will be applicable or not.\" As can be seen, Ld. Tribunal has not followed the directions of Hon. Gujarat High Court to the extent of discussing and distinguishing the decision of Secunderabad Club, supra, relied upon by the Revenue. 2. Though, Ld. ITAT Rajkot in the matter of Avadh Nagarik Sahkari Mandali Ltd, supra has held that the order of Hon. Gujarat High Court in Katlary Kariyana (2022) (2022) 215 DTR 0125 (Guj), (2022) 327 CTR 0138 (Guj) is not binding on the Assessing Officer as the order of Katlary Kariyana is in different context of Sec. 194A of the Act, and especially, it is in the context of income escaping assessment u/s.147 of the Act, and therefore the ratio of the judgement does not apply to the assessee under consideration. However, while holding so, Ld. ITAT has conveniently neither reproduced not discussed the relevant extract of the order of Hon. Gujarat High Court in Katlary Karivana, supra. It is humbly submitted that by not reproducing relevant extracts of the order of Katlary Kariyana provided as a written submission by the CIT(DR), as well as elaborately contended during hearings, even on the face of the decision of another bench of Ld. ITAT, who have in the matter of Lodhika Seva Sahkari Mandali Ltd ITA No.184/RJT/2022, have reproduced the specific paragraphs from the order of Hon. Gujarat High Court in Katlary Kariyana, supra, is an attempt to bypass a superior wisdom of Hon. Gujarat High Court. It is humbly submitted with utmost regards that Ld. ITAT, Rajkot has conveniently not reproduced the relevant paragraphs wherein Hon. Gujarat High Court has discussed the issue of 80P(2)(d) and has come to the conclusion that once a cooperative society acquires RBI license, it is no longer categorized under the genus/ category of 5 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT cooperative bank. By doing this L4.ITAT, Rajkot has committed grave contempt of Hon. High Court of Gujarat. It is humbly requested that this judicial mistake may be corrected by ld. ITAT, Rajkot and in the present decision relevant extracts of the order of Katlary Kariyana may be reproduced. A copy of submission in the matter of Lodhika Seva Sahkari Mandali Ltd dated 25.01.2024 in enclosed for ready reference. 3. It is humbly requested that the issue of applicability or not of 80P(2)(d) deduction on the interest / dividend earned by cooperative society from their surplus deposits with RBI licensed cooperative bank may now be referred to Hon'ble President, ITAT for constitution of a Special Bench. This is being prayed in the light of the fact that Ld.ITAT, Rajkot has given conflicting decision with respect to the interpretation of the decision of Hon. High Court of Gujarat in the matter of Katlary Kariyana, supra. In their order in ITA No.184/RJT/2022 Ld.ITAT, Rajkot has reproduced the relevant extracts of the order of Hon.Gujarat High Court in Katlary Kariyana, supra, and has held that the decision of Hon.High Court of Gujarat is applicable and is being respectfully followed by Ld.ITAT, Rajkot. However, despite such decision and factual matrix being brought to the attention of Ld.ITAT, Rajkot during the hearing in the matter of ITA No.126/RJT/2023 in the case of Avadh Nagarik Sahkari Mandali Ltd vs. PCIT-1, Rajkot, Ld.Tribunal has excluded the relevant extracts of the order of Hon. High Court of Gujarat in Katlary Kariyana while reproducing the submission of CIT(DR), and, have thereafter went on to hold that the decision of Katlary Kariyana is not in the context of sec.80P(2)(d). Thus, there is sufficient cause for constitution of three Member Bench to decide these issues and hence a request for a Special Bench is made. 4. Ld ITAT, Rajkot has mistakenly stated that the 4th argument of Ld.CIT(DR) is that Hon. Gujarat high Court in the case of Katlary Kariyana, supra, has followed the judgement of Hon. Supreme Court in the case of Totagars Co- operative Sale Society, 108 Taxmann 282 (SC) which clearly states that cooperative banks are not species of genus co-operative society. It is humbly submitted that this is an error of interpretation and a mistake apparent on record and Ld.ITAT has incorrectly mentioned the 45 argument and it has been worded to show that there is some confusion at the end of Revenue. It is humbly submitted that neither during the argument nor in written submissions such contention has been made by the Revenue. This further gives the reason for Ld.ITAT to reconsider its decision and correct their decision in the matter of Avadh Nagarik Sahkari Mandali Ltd, supra and also follow and adhere the decision of Hon. Gujarat High Court in the case of Katlary Kariyana, supra. 6. We have heard both the parties. We see no reasons to take any other view of the matter than the view so taken by the Division Bench of this 6 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT Tribunal in assessee’s own case vide order dated 31.07.2024. In this order, the Tribunal has inter alia observed as follows: 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: 7 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 8 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 9 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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, and ld. 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. 10 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 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 11 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 Supreme Court 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 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 the interest 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 12 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 was first 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’ble jurisdictional Gujarat High Court on the ‘issue’ under consideration, which we are going to discuss in the subsequent paragraphs of this order. 13 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 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 14 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 15 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT (supra) is distinguishable on these facts, hence we do not accept the ratio laid down in the said decision. (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, 16 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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) (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 old judgments 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 17 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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: (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 18 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT 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 (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. 39. In the result, appeal filed by the assessee is allowed.” 7. Learned DR for the revenue, submitted that there are conflicting decisions at Tribunal level, so far, the deduction under section 80P(2)(d) of the Act, is concerned, therefore, Special Bench may be constituted to resolve this issue. We do not agree with ld DR for the revenue, as the direct judgements pertaining to section 80P(2)(d) of the Act, are available, from the jurisdictional, Hon`ble Gujarat High Court, which are in favour of assessee, 19 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT and these judgements were not overruled by the hon`ble Gujarat High Court, by constituting a larger bench, hence this Tribunal decided the issue, by respectfully following the judgements of 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) wherein it was 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. Normally, the Special Bench is constituted when there is no judgement of any High Court or jurisdictional High Court, however, we find that there are direct judgements, of the jurisdictional Hon`ble Gujarat High Court on the issue under consideration, as referred above, therefore, the question of Special Bench, does not arise, as these two judgements, noted above, which are in favour of assessee, never distinguished and never overruled by the Hon’ble Jurisdictional High Court of Gujarat in the case of Katlary Karayana(supra). Other arguments, mentioned by Ld. DR for the revenue, in the written submission, have been discussed in the case of Shri Avadh Nagarik Sahkari Mandli Ltd. vs. Pr.CIT in ITA No.126/Rjt/2023 (supra), hence, we do not deal with them. 8. Therefore, as the issue is squarely covered in favour of the assessee by the decision of the Coordinate Bench, in the case of Shri Avadh Nagarik Sahkari Mandli Ltd. vs. Pr.CIT in ITA No.126/Rjt/2023 (supra) and there is 20 ITA No.315/RJT/2024 – A.Y. 2018-19 Surendranagar District Co-operative Milk Producer Union Limited vs. PCIT no change in facts and law and the Revenue is unable to produce any material to controvert the aforesaid findings of the Coordinate Bench (supra). We find no reason to interfere in the said order of the Coordinate Bench, therefore, respectfully following the binding judgment of the Coordinate Bench in the case of Shri Avadh Nagarik Sahkari Mandli Ltd. (Supra), we quash the order passed by Ld. PCIT u/s. 263 of the Act. 9. In the result, appeal filed by the assessee is allowed. [ Order pronounced in the open court on 16/10/2024] Sd/- Sd/- (DINESH MOHAN SINHA) (ARJUN LAL SAINI) ACCOUNTANT MEMBER ACCOUNTANT MEMBER Rajkot : Dated 16/10/2024 आदेश की Ůितिलिप अŤेिषत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order Assistant Registrar/Sr. PS/PS ITAT, Rajkot "