‘Detailed Enquiry and Proper Application of Mind by AO While Allowing Deduction u/s 80P(2)(d)’: ITAT Quashes PCIT’s Revision Order [Read Order]

The Pune bench of the Income Tax Appellate Tribunal (ITAT) quashed the revision order passed by the Principal Commissioner of Income Tax (PCIT)-3, Pune, under Section 263 of the Income-tax Act, 1961, by noting that the Assessing Officer (AO) had conducted a detailed enquiry and applied his mind properly while allowing the deduction under Section 80P(2)(d) of the Act.

In this case, the assessee, Pune Zilha Madhyawarti Sahakari Bank Sevakanchi Sahakari Patsanstha Maryadit had appealed against the order passed by the Principal Commissioner of Income Tax (PCIT) for the assessment year (AY) 2021-22.

Coming to the facts of the case, the assessee had made a claim for deduction under Section 80P(2)(d) of the Income Tax Act for the interest income of Rs. 30,72,697 earned from investments made with Pune District Central Cooperative Bank Ltd. (PDCC). The AO, after examining the claim, disallowed the deduction under Section 80P(2)(d) but allowed proportionate expenses incurred for earning the interest income, calculating the disallowance at 6.7% of the total deduction claimed.

The PCIT, was of the opinion that the AO’s order was erroneous and prejudicial to the revenue’s interests, setting it aside for fresh examination on three key issues: eligibility for deduction under Section 80P(2)(a), verification of actual expenditure for earning interest income, and the applicability of Section 80P(2)(d) read with Section 80P(4) of the Income Tax Act.

The ITAT noted that the AO had undertaken a thorough enquiry during the assessment proceedings.

The ITAT, by relying on its recent decision in the case of Annapurna Nagari Sahkari Pathsanstha Maryadit Yawal in ITA No.2471/PUN/2024 order dated 24.03.2025, held that interest income from cooperative banks is eligible for deduction under Section 80P(2)(d), as cooperative banks are essentially cooperative societies with banking licenses. The Tribunal concluded that the AO’s order was neither erroneous nor prejudicial to the revenue.

The ITAT set aside the PCIT’s revision order and restored the AO’s original assessment dated 02.12.2022. The bench comprising Manish Borad (Accountant Member) and Vinay Bhamore (Judicial Member) allowed the assessee’s appeal.

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