COMMISSIONER OF INCOME TAX III HYDERABAD V. A.P.STATE CO.OPERATIVE BANK LTD. HYDERAB

ITTA/236/2003

AI Insights

The case involves two appeals by the Commissioner of Income Tax (CIT) against the A.P. State Cooperative Bank Ltd., concerning the exemption of income derived from investments made by the bank. The appeals were related to the assessment years 1994-95 and 1995-96. The core legal issue was whether the income derived from such investments qualifies for exemption under Section 80P(2)(a)(i) of the Income Tax Act, 1961. The Income Tax Appellate Tribunal had previously ruled in favor of the bank, a decision which the CIT challenged in the High Court. The High Court, referencing a Supreme Court decision in CIT v. Karnataka State Cooperative Apex Bank, upheld the Tribunal's decision, affirming the bank's entitlement to the exemption.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 727930 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 14-09-2022
• Assessment Year: misc
• Other Referred Cases: CIT v. Karnataka State Cooperative Apex Bank, M.P. Cooperative Bank Ltd v. CIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHALLA GUNARANJAN
• Assessee Lawyers: B SARMA
• Keywords: Exemption; Income Tax; Investment income; Voluntary Reserves
• Section: 260; 80P(2)(a)(i)

Judgement Text

"IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY, THE FOURTEENTH DAY OF SEPTEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HONOURABLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HONOURABLE SRI JUSTICE C.V. BHASKAR REDDY INCOME TAX TRIBUNAL APPEAL NOs: 236 OF 2003 AND 263 OF 2003 INCOME TAX TRIBUNAL APPEAL NO: 236 OF 2003 lncome Tax Tribunal Appeal Under Section 260 of the lncome Tax Act, against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench \"A\" Hyderabad in ITA No.1030l{ydl1997 M.P.No.4/Hyd/20O2, tor assessment year 1995-96 dated 28-02-2002 preferred against the order of the Commissioner of lncome Tax (Appeals)- lll, Hyderabad, Appeal No.127lAc4(6)/ClT(A) lll/ 96-97, dated 06-05-1997, preferred against the order of thd Assistant'Commissioner of lncome Tax, company circle-4(6), Hyderabad in PAN/GlR No.T-133/Ac-4(6), dated 14-1 1-1996 Between: Commissioner Of lncome Tax lll Hyderabad, AND ...APPELLANT A.P.State Co.Operative Bank Ltd., Troop Bazar Hyderabad. ...RESPONDENT INCOME TAX TRIBUNAL APPEAL NO: 263 oF 2003 lncome Tax Tribunal Appeal Under Section 260 of the lncome Tax Act, against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench \"A' Hyderabad in ITA No.1 17lHyd/1999 for assessment year 1994-95 dated 16-1 1-2001 preferred against the order of the Commissioner of Income Tax (Appeals)- lll, Hyderabad, Appeal No.474lAc4(6/ClT(A) lll/ 96 187/A C 4(6yClT (A)-.lll/97, dated 21-10-199o, preferred against the order of the Assistant Commissioner of lncome Tax, company circle-4(6), Hyderabad in PAN/GIR No.T-133/Ac-4(6), dated 30-06-1998 I I Between: Commiss,:ner Of lncome Tax lll Hyderabad, AND Counsel for thc Appellant: SRI B NARASIMHA SARMA Counsel for thrr fts5psndents: SRI CHALLA GUNARAN.IAN The Court mad e the following: COMMON JUDGMENT .,.APPELLA.NT A.P.Stat€ Co.Operative Bank Ltd., Troop Bazar Hyderabac. ...RESPONDENT THE HON'BLE THE CHIEFJUSTICE UJJAI BHTIYAN AND TIIE HON'BLE SRI LUSTICE C.V.BFIASKAR REDDY I.T.T.A.Nos.236 & 263 of 2fi)3 COMMON JUDGMENT : (Per the Hon'bh the Chief Junice Lijjal Bhryan) This order will dispose of both I.T.T.ANos.2l6 of 2003 and263 of 2003. 2. I.T.T.ANo. 236 of 2003 pertains to assessment War 1995-96 vu'hereas I.T.T.ANo.263 of 2003 relates to assessment year 1994- 95. Both these appeals have been preferred bythe revenue against the order dated 25.09.2001 passed by the Income . Tax Appellate Tribunal, Hyderabad Bench 'A', H/erabad in I.T.ANos.ll7 & 1r8/H.N1999. l. We have heard Mr. B.Narsimha Sarma, leamed counsel for the appellant (revenue) and Mr. Challa Gunaranjan, leamed counsel 4. In both the appeals, the following substantial question of law has been proposed: Xr'hether on rhe face and in the circumstances of the case, assessee is endded to claim exemption under for the respondent- assessee. I ) Section 800 X2)G)(i of the Income Tax fut, 1961 ur rcspect of income der ved from investmens made by *y o[ vol rntary reserves ? 5. This no longer res integra as the sarne has been lss re ls conclusively dr cided by the Supreme Coun in CIT v. I*trnataka State Cooper tive Apex Bankr. The same questicn wa; framed bythe Suprem: C-ourt in the above decision. Suprernc C>un held as follows: The ques ion is whether we agree witl the reasoning in M.P. Cooperativr Bank Ltd v. CITr. There is no doubl anrl it is not disputer that the assessee Cooperative Bank is n-'quir ed to place a pan of its funds with State Bank or Resenr: Bark of India to enal,le it to carry on its banking business. Th Ls beilrg so, any income derived from funds so placed arises l:rom the business car ied on by it and the xsessee has not b'. reas,rn of Section 80-P(2Xa)(0, to pay income tax drereon. The placement of such fun< s being imperative for ttre purposes of ,:,urying on the banking business, the income derived therefrorr would be income fron the assessee's business. We are unable to tal.e the vieu. that for urd favour with the Bench that decided .I,: case of M.P. Coopt rative Bank Ltd v. CIT that on!. incorne derived from circular ing of working capital would fall within liection 80- '(2001) 7 scc 654 . 251 rrR 194 '? lrsso; z scc s+r P(2Xd0. Therc is nothing in the phraseology of that provision which malas it applicable only rc income derived from wor{) -1 , I l,-, I D "