DCIT, Circle - Bankura, Bankura V. Bankura District Central Cooperative Bank Ltd., Bankura

ITA 137/KOL/2008

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48314 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-05-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 01-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S GAUTAM
• Section: 80P; 56

Judgement Text

, , , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA [ . . . . . .. . , , ! ! ! ! , ] [BEFORE HONBLE SHRI S.V. MEHROTRA, AM & HONBLE SHRI MAHAVIR SINGH, JM !' !' !' !' / I.T.A NO. 137/KOL/2008 #$ %& #$ %& #$ %& #$ %&/ // / ASSESSMENT YEAR : 2003-04 DY. COMMISSIONER OF INCOME TAX -VS.- BANKURA DISTRICT CENTRAL CO-OPT. BANK CIRCLE BANKURA. LIMITED, BANKURA. [ () () () () /APPELLANT ] ]] ] [ +,() +,() +,() +,()/ // / RESPONDENT ] ]] ] () () () () / FOR THE APPELLANT : SHRI S. S. GAUTAM, CIT +,() +,() +,() +,() / FOR THE RESPONDENT : NONE (ADJOURMENT PETI TION BY FAX) - /ORDER . . . . . .. . , PER S. V. MEHROTRA, A. M. THE ASSESSEE HAS PREFERRED THIS APPEAL FOR ASSESSM ENT YEAR 2003-04 AGAINST THE ORDER OF LD. CIT(A), DURGAPUR DATED 26.11.2007. 2. THE ASSESSEE, A CO-OPERATIVE SOCIETY, IN THE REL EVANT ASSESSMENT YEAR, WAS ENGAGED IN THE BANKING ACTIVITIES PROVIDING CREDIT FACILITIES TO I TS MEMBERS. IT HAD FILED ITS RETURN OF INCOME SHOWING TOTAL INCOME AT NIL AFTER CLAIMING DEDUCT ION U/S. 80P OF THE INCOME TAX ACT. THE ASSESSING OFFICER EXAMINED THE ISSUE AS TO WHETHER THE INCOME DERIVED FROM INTEREST ON GOVERNMENT SECURITIES AND FROM BANKS COULD BE SAID TO BE INCOME DERIVED BY THE ASSESSEE FROM THE BUSINESS OF BANKING WITHIN THE MEANING OF SECTI ON 80P TO QUALIFY FOR EXEMPTION. HE OBSERVED THAT THE CO-OPERATIVE BANK WAS LEGALLY OBLIGED TO P LACE CERTAIN GOVERNMENT SECURITIES WITH SBI/RBI AND THESE SECURITIES COULD NOT BE WITHDRAWN BY THE SAID BANK WITHOUT ANY SPECIAL CIRCUMSTANCES. AFTER CONSIDERING THE DECISIONS OF H ONBLE SUPREME COURT IN THE CASE OF MADHYA PRADESH CO-OPERATIVE BANK LTD. VS. ACIT [1996] 218 ITR 438 (SC) AND IN THE CASE OF CIT VS. KARNATAKA STATE CO-OPERATIVE APEX BANK [2001] 251 ITR 194 (SC) AND ALSO AFTER CONSIDERING THE PROVISIONS OF SECTION 24 OF THE BANKING REGULATION ACT, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT AS PER SECTION 24 OF THE SAID ACT T HE MAXIMUM LIMIT HAD BEEN FIXED AT 40% OF THE [ ITA NO. 137/KOL/2008] 2 TOTAL DEMAND AND TIME LIABILITIES AND, THEREFORE, T HE NET PROFIT EARNED BY INVESTING THE AMOUNT, WHICH IS IN EXCESS OF 40% WAS NOT ELIGIBLE FOR DEDU CTION U/S. 80P. HE ALSO OBSERVED THAT TOTAL INVESTMENT REQUIRED TO BE MADE IN SLR AND NON-SLR I S WITHIN THE AMBIT OF SECTION 24 OF BANKING REGULATION ACT. AFTER CONSIDERING THE DETAILS OF IN VESTMENT MADE BY THE ASSESSEE, HE DETERMINED THE INCOME AT RS.1,55,46,560/-. HE ALSO DETERMINED THE OTHER INCOME AT RS.27,300/- BEING INCOME EARNED FROM LETTING OUT OF AUDITORIUM HALL AND THUS , DETERMINED THE TAXABLE INCOME AT RS.1,55,46,560/-. BEFORE LD. CIT(A), ASSESSEE HAD O NLY ASSAILED THE FINDING IN REGARD TO TAXABLE INCOME DETERMINED AT RS.1,55,46,560/- OUT OF INTERE ST RELATABLE TO EXCESS INVESTMENT OF RS.1,55,46,560/-. BEFORE LD. CIT(A), IT WAS FURTHER POINTED OUT THAT NO WHERE ASSESSING OFFICER HAD DEFINED SLR AND NON-SLR NOR HE HAD GIVEN A BREA K-UP OF THIS INVESTMENT. THEREFORE, THE VERY PREMISE THAT ASSESSEE BANK HAD MAINTAINED IN CASH, GOLD OR UNENCUMBERED APPROVED SECURITIES AN AMOUNT MORE THAN 40% OF ITS TOTAL DEMAND AND TIME L IABILITIES ITSELF WAS FACTUALLY INCORRECT. FURTHER, IT WAS POINTED OUT THAT EVEN IN THE CIRCUM STANCES, WHERE THE INVESTMENT IN SLR EXCEEDED 40% OUT OF THE DEMAND AND TIME LIABILITIES, THE DED UCTION U/S. 80P(2)(A)(I) OF THE INCOME TAX ACT COULD NOT BE DENIED IN RESPECT OF THAT PART OF NET INTEREST WHICH WAS ATTRIBUTABLE TO INVESTMENTS OTHERWISE THAN IN CONFORMITY WITH SECTION 24 OF THE BANKING REGULATION ACT. THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS TO SUBMIT THAT ASSESSEE BANK WAS ENTITLED TO CLAIM DEDUCTION U/S. 80P(2)(A)(A)(I) IN RESPECT OF INCOME EARNED FROM UT ILIZATION OF ITS VOLUNTARY RESERVES OTHER THAN STATUTORY RESERVES PROVIDED THAT THE INCOME DERIVED BY THE ASSESSEE FROM THE INVESTMENT OF ITS VOLUNTARY RESERVES WAS UTILISED BY IT IN THE COURSE OF ORDINARY BANKING BUSINESS :- (I) MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD . VS. I.T.O. [2001] 251 ITR 522 (SC) (II) GUJARAT STATE CO-OPERATIVE BANK LTD. VS. CIT [2001] 251 ITR 522 (SC) (III) BURDWAN CENTRAL CO-OPERATIVE BANK LTD. (IV) FARUKHABAD GRAMIN BANK (V) DURGAPUR STEEL PEOPLES CO-OPERATIVE BANK LTD. (VI) PASCHIM BANGA GRAMIN BANK LD. CIT(A) DELETED THE ADDITION BY OBSERVING AS UND ER :- AS PER THE BR ACT, A CO-OPERATIVE BANK WAS OBLIGED TO MAINTAIN IN CASH, GOLD OR UNENCUMBERED APPROVED SECURITIES AN AMOUNT WHICH SH OULD NOT BE AT THE CLOSE OF THE BUSINESS OF ANY DAY LESS THAN 25% OR SUCH OTHER PERCENTAGE NOT EXCEEDING 40% OF TOTAL OF ITS DEMAND AND TIME LIABILITIES. TH E AO COMBINED BOTH THE [ ITA NO. 137/KOL/2008] 3 INVESTMENTS (IN STATUTORY AND NON-STATUTORY RESERVE S WHICH HE MENTIONED AS SLR AND NON-SLR IN THE IMPUGNED ORDER) TO COMPUTE THE P ERCENTAGE. IN FACT, THE INVESTMENT IN THE STATUTORY RESERVES WAS VERY MUCH WITHIN THE LIMITS LAID DOWN IN THE BR ACT. IT HAS TO BE EMPHASISED THAT SUCH LIMIT S ARE NOT FIXED IN THE BR ACT OR THE CIRCULARS OF THE RBI IN RESPECT OF ANY ONE P ARTICULAR DAY. THE EXACT STIPULATIONS TO BE COMPLIED BY THE CO-OPERATIVE BAN KS WITH REGARD TO THE CASH AND STATUTORY RESERVES ARE AS UNDER: CASH RESERVE RATIO(CRR) IN TERMS OF SECTION 18 OF THE BANKING REGULATION AC T (B. R. ACT) 1949 (AS APPLICABLE TO CO-OPERATIVE SOCIETIES) EVERY CO- OPERATIVE BANK IS REQUIRED TO MAINTAIN ON A DAILY BASIS CASH RESERVE, THE AMOUNT OF WHICH SHALL NOT BE LESS THAN 3% OF ITS DEMAND AND TIME LIABILITIES(DTL) AS OBTAI NING ON THE LAST FRIDAY OF THE SECOND PRECEDING FORTNIGHT. STATUTORY LIQUIDITY RATIO(SLR) IN TERMS OF SECTION 24(2AXA) OF THE BANKING REGULAT ION ACT (BR ACT) 1949 (AS APPLICABLE TO CO-OPERATIVE SOCIETIES) EVER Y CO-OPERATIVE BANK IS REQUIRED TO MAINTAIN ON A DAILY BASIS LIQUID ASSETS , THE AMOUNT OF WHICH SHALL NOT BE LESS THAT 25% OR SUCH OTHER PERCENTAGE NOT EXCEE DING 40%(AS MAY BE NOTIFIED), OF ITS DEMAND AND TIME LIABILITIES AS OB TAINING ON THE LAST FRIDAY OF THE SECOND PRECEDING FORTNIGHT. 3. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE OR DER OF LD. CIT(A) AND ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS COOPE RATIVE SALE SOCIETY LTD. VS. ITO, KARNATAKA [2010] 188 TAXMAN 282 (SC) WHEREIN IT WAS HELD THAT INTEREST EARNED ON FUNDS WHICH WERE NOT REQUIRED FOR BUSINESS PURPOSES, AT THE GIVEN POINT OF TIME, WAS NOT ELIGIBLE FOR DEDUCTION U/S. 80P, AS SUCH, INTEREST INCOME FELL IN THE CATEGORY OF OT HER INCOME TAXABLE U/S. 56 OF THE INCOME TAX ACT. HOWEVER, IN THE PRESENT CASE ASSESSING OFFICER HAS NOT GIVEN ANY SUCH FINDING BUT HAS PROCEEDED ON THE PREMISE THAT TOTAL INVESTMENT EXCEEDED 40% L IMIT LAID DOWN U/S. 24 OF THE BANKING REGULATION ACT. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORDS OF THE CASE. THE ASSESSING OFFICER HAD PROCEEDED ON TH E PREMISE THAT TOTAL INVESTMENT REQUIRED TO BE MADE IN SLR AND NON-SLR WAS WITHIN THE AMBIT OF SEC TION 24 OF THE BANKING REGULATION ACT. HOWEVER, IT WAS NOT DISPUTED THAT THE INVESTMENTS W ERE MADE IN THE NORMAL COURSE OF BANKING BUSINESS AND THEREFORE, IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERATIVE BANK LTD. (SUPRA), TH E ASSESSEE WAS ENTITLED FOR DEDUCTION U/S. 80P WHEREIN IT WAS HELD AS UNDER :- (I) THAT INTEREST ON INVESTMENTS FROM STATUTORY R ESERVES WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80P(2)(A)I). [ ITA NO. 137/KOL/2008] 4 WHETHER INCOME DERIVED BY THE ASSESSEE CO-OPERATIVE BANK FROM THE INVESTMENT OF ITS VOLUNTARY RESERVES OTHER THAN STA TUTORY RESERVES IS EXEMPT UNDER SECTION 80P(2)(A)(I) DEPENDED UPON WHE THER THE VOLUNTARY RESERVES WERE UTILIZED IN THE COURSE OF I TS ORDINARY BANKING BUSINESS. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT (S UPRA), WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) AND CONFIRM THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE DEPARTMEN T IS DISMISSED. - - - - . . . . / .# 0 1 / .# 0 1 / .# 0 1 / .# 0 1 2 2 2 2 ORDER PRONOUNCED IN THE OPEN COURT ON 28. 07. 2011 SD/- SD/- [ ! , ] [ .. , ] [ MAHAVIR SINGH ] [ S.V. MEHROTRA ] JUDICIAL MEMBER ACCOUNTANT MEMBER ( (( (2 2 2 2) )) ) DATED : 28 TH JULY, 2011. - 5 + 6 76%/ COPY OF THE ORDER FORWARDED TO: 1. () /APPELLANT :DY.COMMISSIONER OF INCOME TAX, OPERATI VE CIRCLE-BANKURA, BILASH BHAWAN, C HANDMARIDANGA, BANKURA-722101. 2 +,() / RESPONDENT : BANKURA DISTRICT CENTRAL CO-OPT. BA NK LTD., MACHANTOLA, BANKURA-722101. 3. -# / CIT, 4. -# ()/ CIT(A), KOLKATA. 5. 0 + #/ DR, KOLKATA BENCHES, KOLKATA [,6 + / TRUE COPY] -#./ BY ORDER, !> /ASSTT REGISTRAR [KKC ?@ #A> B /SR.PS]