ITO, Pune V. Ramrajya C-op Bank Ltd., Pune

ITA 259/PUN/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3183 (ITAT-PUNE)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-11-2010
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 12-02-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: MANJU AJWANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 259/PN/10 (ASSTT. YEAR 2006-07) ITO, WARD 6(2), PUNE .... APPELLANT VS. RAMRAJYA CO-OPERATIVE BANK LTD., P-7/8 INDIRA NAGAR UPPER MARKET, BIBWEWADI, PUNE-411037 PAN NO. AAAAR1141E . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SMT. MANJU AJWANI ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF THE CIT(A)-III, PUNE DATED 16/11/2009 FOR THE ASSESSMENT YEAR 2006-07 ON THE GROU ND THAT CIT(A) ERRED IN DELETING THE DISALLOWANCE MADE U/S. 80P(2)(A)(I) OF THE ACT, ON ACCOUNT OF INTEREST INCOME EARNED FROM INVESTMENT FROM DEPOSITS (SIC- MUTU AL FUNDS). NONE APPEARED ON BEHALF OF THE ASSESSEE. 2. THE ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDE R THE MAHARASHTRA CO-OP. SOCIETIES ACT. DURING THE PROCEEDINGS BEFORE US, NONE FOR THE ASSESSEE WAS PRESENT. ON THE OTHER HAND, LD DR HELPED US TO UNDERSTAND THE FACTS OF THE CASE AND OF COURSE, HE STRONGLY RELIED ON THE ORDERS OF THE REVENUE. 3. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE LIGHT OF MATERIAL ON RECORD AND T HE PRECEDENTS CITED. WE FIND THAT THE ISSUE INVOLVED IN THIS CASE IS COVERED IN F AVOUR OF THE ASSESSEE BY THE JUDGMENTS OF THE SUPREME COURT IN THE FOLLOWING CASE S: ITA NO. 259/PN/10 A.Y 2006-07 PAGE 2 OF 3 I) CIT VS. NAWANSHAHAR CENTRAL CO-OP. BANK LTD. (2007) 289 ITR 6 (SC) II) CIT VS. RAMANATHAPURAM DIST. CO-OP. CENTRAL BANK LTD. (2002) 255 ITR 423 (SC) III) CIT VS. KARNATAKA STATE CO-OP. APEX BANK (2001) 251 ITR 194 (SC) 4. FURTHER, THE ITAT AHMEDABAD SPECIAL BENCH IN THE C ASE OF SURAT DISTRICT CO- OP. BANK LTD. VS. ITO (2003) 85 ITD 1 (AHD) (SB) OB SERVED IN PARAGRAPH 57 OF ITS ORDER AS UNDER: IN VIEW OF THE AFORESAID DISCUSSIONS, WE ARE OF THE CO NSIDERED OPINION THAT THE ENTIRE INCOME IN QUESTION VIZ. INTEREST INCOME ON INV ESTMENTS IN GOVERNMENT SECURITIES, FIXED DEPOSITS, KVPS AND IVPS, IN VESTMENTS IN UTI, ETC. OUT OF SURPLUS/IDLE MONEY AVAILABLE FROM WORKING CAPI TAL INCLUDING VOLUNTARY RESERVES , EXCESS COLLECTION OF INTEREST TAX AND LOCKER RENT ARE ALL INCOME ATTRIBUTABLE TO BUSINESS OF BANKING AND ARE ELIGIBL E FOR GRANT OF DEDUCTION U/S 80P(2)(A)(I) OF THE ACT . 5. SIMILARLY, THE ITAT RAJKOT IN THE CASE OF RAJKOT NAGRIK SAHAKARI BANK LTD. (2005) 98 TTJ (RJT) 330 HELD THAT INCOME FROM TRADING IN GOVERNMENT SECURITIES FORMS PART OF BANKING BUSINESS IN VIEW OF THE PROVISIO NS OF SECTION 6 OF THE BANKING REGULATION ACT. 6. SIMILARLY, IN THE CASE OF FARRUKHABAD GRAMIN BANK (S UPRA) THE HONBLE THIRD MEMBER OF I.T.A.T AGRA BENCH HAS HELD THAT ACQUIRING AND HOLDING OF SECURITIES AND INVESTMENTS OF ALL KINDS, WHICH IS A BUSINESS P ERMITTED TO BE CARRIED ON BY A REGIONAL RURAL BANK U/S 6(1)(A) OF BANKING REGULATION ACT, READ WITH SECTION 18(1) OF REGIONAL RURAL BANKS ACT, IS AN ACTIVITY WHICH IS CL OSELY AND INEXTRICABLY CONNECTED WITH BUSINESS OF BANKING AND AS SUCH ACTIVITY OF IN VESTING EITHER IN SLR OR IN NON- SLR INVESTMENT CANNOT BE DIVORCED FROM BUSINESS OF BA NKING. 7. IN THIS CONNECTION, WE MAY REFER TO THE DECISION O F HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. BARODA PEOPLES CO-OP. BA NK LTD. REPORTED IN (2006) 280 ITR 282 (GUJ) WHERE THE TRUE IMPORT AND MEANING OF TH E DECISION OF HONBLE SUPREME COURT IN THE CASE OF MEHASANA DIST. CENTRAL CO -OP. BANK LTD. VS. ITO REPORTED IN (2001) 251 ITR 522 (SC) HAS BEEN APPRECIAT ED AND ANALYZED BY THE HONBLE GUJARAT HIGH COURT BY OBSERVING AS UNDER : HEAD NOTE : THE JUDGMENT AND ORDER OF A HIGH COURT WHEN CARRIE D IN APPEAL BEFORE THE SUPREME COURT ON THE VERY SAME ISSUE, WOULD NOT HAV E ANY INDEPENDENT EXISTENCE THEREAFTER IN THE LIGHT OF THE PRINCIPLES OF MERGER. THE JUDGMENT AND ORDER OF THE HIGH COURT WOULD STAND MERGED IN TH E JUDGMENT AND ORDER OF THE SUPREME COURT ESPECIALLY IN A CASE WHERE THE ISSUE IN QUESTION IS ITA NO. 259/PN/10 A.Y 2006-07 PAGE 3 OF 3 DIRECTLY CONSIDERED BY THE SUPREME COURT.THE DECISI ON IN GUJARAT STATE CO- OP. BANK LTD. VS. CIT (2001) 250 ITR 229 (GUJ) WAS CONSIDERED BY THE SUPREME COURT IN MEHSANA DIST. CENTRAL CO-OP. BANK LTD. VS. ITO (2001) 251 ITR 522 AND HAS MERGED IN IT. THE ORDER OF THE SUP REME COURT COULD NOT AND SHOULD NOT BE CONSTRUED AS THE SUPREME COURT COULD N OT HAVE CONTEMPLATED PASSING AN ORDER CONTRARY TO THE PROVISIONS OF THE ACT. THE DIRECTION OF THE SUPREME COURT IN MEHSANA DIST. CENTRAL CO-OP. BANK S CASE (2001) 251 ITR 522, CAN ONLY REFER TO ASCERTAINMENT OF UTILIZATION OF NET INCOME OF EARLIER YEARS, WHICH FORMS PART OF THE FUNDS WHICH ARE INVE STED AND GIVEN THE NOMENCLATURE OF VOLUNTARY RESERVES. THE ASSESSEE A CO-OPERATIVE BANK EARNED INTEREST FROM INVESTMENTS IN (I) IDBI BONDS; (II) SBI BONDS, (III) SARDAR SAROVAR NAR MADA BONDS AND (IV) KISAN VIKAS PATRA. THE A.O TREATED ALL THE AFORESAID INV ESTMENTS AS FIXED CAPITAL AND HELD THAT THE INVESTMENTS WERE NOT AVAILABLE FO R NORMAL BANKING BUSINESS. THEREFORE, THE ENTIRE INCOME TAX TAXABLE. THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT THE INCOME WAS ENTITLED TO SPECI AL DEDUCTION U/S 80P. ON APPEAL TO THE HIGH COURT HELD, DISMISSING THE APPEAL THAT THE TRIBUNAL WAS RIGHT IN ALLOWING DEDUCTIONS U/S 80P(2)(A)(I) OF THE ACT ON INTEREST INCOME AS BEING ATTRIBUTABLE TO THE BUSINESS OF THE BANKING . 8. RESPECTFULLY FOLLOWING THE SAID DECISIONS, THE G ROUND RAISED IS DECIDED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, THE GROUND RAISED BY THE ASSESSEE IS ALLOWED . 9. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 12 TH NOVEMBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 12 TH NOVEMBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ITO, WARD 6(2), PUNE 2. ASSESSEE 3. CIT(A)-III, PUNE 4. CIT-III, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE