Bansabati Co-operative Bank Ltd., , Hooghly V. Principal CIT - 8, Kolkata , Kolkata

ITA 271/KOL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2046 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-11-2020
• Assessment Year: 2012-2013
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: IMOKABA JAMIR
• Assessee Lawyers: SOUMITRA CHOW DHURY
• Keywords: Set aside
• Section: 80P; 263; 28

Judgement Text

ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 1 | P A GE , A , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA ( ) . , /AND . . , ) [BEFORE SHRI J. SUDHAKAR REDDY, AM & SHRI A. T. VAR KEY, JM] I.T.A. NO. 271/KOL/2018 ASSESSMENT YEAR: 2012-13 BANSABATI CO-OPERATIVE BANK LTD. (PAN: AAALB 0378 E ) VS. PCIT-8, KOLKATA APPELLANT RESPONDENT DATE OF HEARING (VIRTUAL) 24.11.2020 DATE OF PRONOUNCEMENT 03.12.2020 FOR THE APPELLANT SHRI SOUMITRA CHOWDHURY, ADVOCATE FOR THE RESPONDENT SHRI IMOKABA JAMIR, CITDR ORDER PER SHRI A.T. VARKEY, JM: THIS IS AN APPEAL PREFERRED BY THE ASSESSEE- CO-O PERATIVE BANK AGAINST THE ORDER OF LD. PRINCIPAL COMMISSIONER OF INCOME TAX-8 , KOLKATA (HEREINAFTER REFERRED TO AS PCIT) PASSED U/S 263 OF INCOME TAX ACT, 196 1 (HEREINAFTER REFERRED TO AS THE ACT) DATED 22.02.2017 FOR A.Y. 2012-13. 2. AT THE OUTSET IT IS NOTED THAT THERE WAS A DELAY OF 293 DAYS IN FILING THIS APPEAL AND THE ASSESSEE HAS FILED CONDONATION PETIT ION. AN AFFIDAVIT HAS BEEN FILED BY THE CHAIRMAN OF ASSESSEE BANK WHEREIN IT HAS BEEN S TATED THAT DUE TO NEGLIGENCE ON THE PART OF ACCOUNTANT OF BANK SHRI SHYAMAL CHATTOPADHY AY, WHO KEPT THE FILE IN A DRAWER HAD LATER FORGOTTEN ABOUT THE FILE AND LATER WHEN THEY REALIZED ABOUT THE OMISSION, THERE WAS A DELAY IN FILING THIS APPEAL BEFORE THIS TRIBUNAL. IT IS NOTED THAT THERE WAS NO MALA FIDE INTENTION ON THE PART OF ASS ESSEE NOT TO FILE THE APPEAL ON TIME BEFORE THIS TRIBUNAL. SINCE WE FIND THAT THERE WAS NO REASON FOR THE ASSESSEE NOT TO FILE ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 2 | P A GE AN APPEAL ON TIME, WE ARE OF THE OPINION THAT THE A SSESSEE SHOULD NOT BE PENALIZED FOR THE LACKADAISICAL ATTITUDE SHOWN BY THE ACCOUNTANT, SO IN THE INTEREST OF JUSTICE, AFTER HEARING THE LD. D.R, WE CONDONE THE DELAY AND PROCE ED TO HEAR THE APPEAL ON MERITS. 3. BY PREFERRING GROUND NOS. 1 AND 2, THE ASSESSEE BANK HAS ASSAILED THE ACTION OF LD PCIT TO HAVE INVOKED THE REVISIONAL JURISDICTION U/S 263 OF THE ACT WITHOUT SATISFYING THE CONDITION PRECEDENT AS PRESCRIBED IN THE STATUTE. ACCORDING TO ASSESSEE, ON A PERUSAL OF THE IMPUGNED ORDER IT COULD REVEAL THAT THE TWIN CONDITION REQUIRED FOR INVOKING REVISIONAL JURISDICTION IS ABSENT. ACCORDI NG TO ASSESSEE, THE ONLY ISSUE THAT HAS BEEN FOUND FAULT BY THE PCIT IS THAT BEFORE PAS SING THE ASSESSMENT ORDERS, THE ASSESSING OFFICER DID NOT MAKE ADEQUATE ENQUIRY IN RESPECT OF INTEREST EARNED AMOUNTING TO RS. 4,55,000/- FROM BOND OF NABARD WHI CH ACCORDING TO LD PCIT CANNOT BE CLAIMED AS DEDUCTION U/S 80P OF THE ACT. SO HE ISSUED SHOW CAUSE NOTICE (SCN) TO THE ASSESSEE CONVEYING HIS INTENTION TO IN TERFERE IN THE ASSESSMENT ORDER INVOKING HIS REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. PURSUANT TO THE SCN OF LD PCIT, THE ASSESSEE REPLIED EXPLAINING HOW THE ACTION OF AO WAS CORRECT AFTER ENQUIRY. HOWEVER THE LD PCIT WAS NOT SATISFIED AND AFTER TAKING NOTE OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS C O-OPERATIVE SALES SOCIETY LTD. VS. ITO (2012) 349 ITR 689 (SC), HE WAS OF THE OPINION THAT THE ASSESSING OFFICER FAILED TO MAKE RELEVANT ENQUIRY WHILE EXAMINING THE DOCUMENTS RELATING TO THE CLAIM OF DEDUCTION CLAIM OF THE ASSESSEE U/S 80P OF THE ACT ON ACCOUNT OF INTEREST EARNED AMOUNTING TO RS. 4,55,000/- FROM THE BOND OF NABARD . THEREAFTER HE SET ASIDE THE ASSESSMENT ORDER DATED 25.03.2015 AND DIRECTED THE FRAMING OF FRESH ASSESSMENT ON THIS ISSUE. 4. AGGRIEVED BY THE AFORESAID ACTION OF THE PCIT, T HE ASSESSEE IS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS. AT THE OUTSET IT WAS POINTED OUT BY THE LD. A.R SHRI SOUMITRA CHOWDHURY THAT THE LD PCIT ERRED IN RELYING ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TOTGARS CO- ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 3 | P A GE OPERATIVE SALES SOCIETY LTD. (SUPRA). ACCORDING TO LD. A.R, THIS CASE LAW [TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA)] IS NOT A PPLICABLE IN THE CASE OF ASSESSEE BECAUSE THAT WAS A SOCIETY PROVIDING CREDIT FACILIT IES TO ITS MEMBERS AND NOT A BANK LIKE ASSESSEE. FURTHER, ACCORDING TO LD. A.R, DURIN G THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO BRING THE D OCUMENTS PERTAINING TO THE CLAIM OF ASSESSEE IN RESPECT OF DEDUCTION UNDER SECTION 80P OF THE ACT, AND AFTER PERUSING THE SAME ONLY THE ASSESSING OFFICER HAS ACCEPTED THAT T HE AMOUNT OF INTEREST RECEIVED FROM THE BOND OF NABARD AS ELIGIBLE FOR DEDUCTION U /S 80P OF THE ACT ALONG WITH INTEREST ON THE DEPOSIT WITH WEST BENGAL CO-OPERATI VE BANK/HOOGHLY DISTRICT CO- OPERATIVE BANK/GOVERNMENT SECURITIES TO THE TUNE O F RS. 5,23,157/- WHICH IS DISCERNIBLE FROM PERUSAL OF PAGE 2 OF ASSESSMENT OR DER. ACCORDING TO LD. A.R, THE ISSUE WHETHER CO-OPERATIVE BANK I.E. THE ASSESSEE IS ELIG IBLE FOR SECTION 80P DEDUCTION ON THE INTEREST EARNED WHILE CARRYING OUT THE BUSINESS OF BANKING IS NO LONGER RES-INTEGRA AND CITED THE DECISION OF HONBLE GUJRAT HIGH COURT IN CIT VS. BARODA PEOPLES CO- OPERATIVE BANK LTD. (2006) 280 ITR 282 (GUJ) WHEREI N WE NOTE THAT THE HONBLE HIGH COURT TOOK NOTE OF SECTION 80P OF THE ACT AND DISCU SSED IN DETAIL ABOUT THIS IN A SIMILAR CASE OF AN ASSESSEE LIKE BANK WHICH ARE RE-PRODUCED (ONLY RELEVANT PORTION) AS UNDER: .. 80P. DEDUCTION IN RESPECT OF INCOME OF CO-OPERATIVE SOCIETIES. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OP ERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED , IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB-SECTION (2), IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE. (2) THE SUMS REFERRED TO IN SUB-SECTION (1) SHALL BE THE FOLLOWING, NAME LY : (A) IN THE CASE OF A CO-OPERATIVE SOCIETY ENGAGED IN (I) CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, OR (II) A COTTAGE INDUSTRY, OR (III) THE MARKETING OF AGRICULTURAL PRODUCE GROWN BY ITS MEMBERS, OR (IV) THE PURCHASE OF AGRICULTURAL IMPLEMENTS, SEED S, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYI NG THEM TO ITS MEMBERS, OR (V) THE PROCESSING, WITHOUT THE AID OF POWER, OF THE AGRICULTURAL PRODUCE OF ITS MEMBERS, OR (VI) THE COLLECTIVE DISPOSAL OF THE LABOUR OF ITS MEMBERS, OR (VII) FISHING OR ALLIED ACTIVITIES, THAT IS TO SAY, THE CATCHING, CURING, PROCESSING, PRESERVING, STORING OR MARKETING OF FISH OR THE PUR CHASE OF MATERIALS AND ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 4 | P A GE EQUIPMENT IN CONNECTION THEREWITH FOR THE PURPOSE O F SUPPLYING THEM TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUS INESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES : 48. SUB-SECTION (1) OF SECTION 80P STIPULATES THAT IN THE CASE OF AN ASSESSEE WHO IS A CO-OPERATIVE SOCIETY, THE SUMS SPECIFIED IN SU B-SECTION (2) SHALL BE DEDUCTED WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE, PROVIDE D THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2). SUB-SECT ION (2) SPECIFIES THE SUMS WHICH ARE DEDUCTIBLE BY WAY OF SPECIFYING ACTIVITIES IN CLAUS ES (A) TO (F). IN CLAUSE (A) AGAIN, THE ACTIVITIES WHICH ARE OF THE PRESCRIBED NATURE, LD. COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW SPECI FIED VIDE SUB-CLAUSE (I) TO (VII). IN THE EVENT OF A CO-OPERATIVE SOCIETY CARRYING ON ANY ONE OR MORE SUCH ACTIVITIES THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINES S ATTRIBUTABLE TO ANY ONE OR MORE ACTIVITIES SHALL BE DEDUCTED. THUS, THE PROVISION I TSELF GIVES AN INHERENT INDICATION THAT FOR THE PURPOSE OF CONSTITUTING THE SUM DEDUCTIBLE WHILE COMPUTING THE TOTAL INCOME OF THE ASSESSEE, THE SUM HAS TO BE THE AMOUNT OF PROFI TS AND GAINS OF BUSINESS. IT IS NECESSARY TO TAKE NOTE OF THE FACT THAT IN SUB-SECT ION (2) OF SECTION 80P OF THE ACT THE WORD INCOME IS NOT USED BUT THE WORD USED IS SUM WHICH IS THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS. THEREFORE, UNDER SUB-SECTION (1) THE GROSS TOTAL INCOME HAS TO INCLUDE INCOME FROM ANY OF THE SPECIFIED ACTIVITIES AND FOR THE PURPOSE OF DEDUCTION THE SUMS SPECIFIED IN SUB-SECT ION (2) SHALL BE DEDUCTED IN COMPUTING THE TOTAL INCOME OF AN ASSESSEE, NAMELY, A CO-OPERATIVE SOCIETY. BEFORE ANALYSING SUB-CLAUSE (I) OF CLAUSE (A) OF SUB-SECTI ON (2) OF SECTION 80P OF THE ACT IT IS NECESSARY TO TAKE NOTE THAT UNDER SUB-SECTION (3) O F SECTION 80P THE DEDUCTION AVAILABLE UNDER SUB-SECTION (1) OF SECTION 80P SHALL BE ALLOW ED AFTER REDUCING FROM THE QUALIFYING INCOME, THE INCOME, IF ANY, AS REFERRED TO IN THE SECTIONS SPECIFIED THEREIN, VIZ. SECTION 80HH, ETC. THIS IS ONE MORE INDICATION AVAILABLE IN THE SCHEME OF THE ACT TO DENOTE THAT WHAT IS DEDUCTIBLE UNDER THE PROVISIONS OF CHAPTER VI-A IS IN TERMS OF THE PROVISIONS OF THE ACT WITH SPECIAL REFERENCE TO SEC TION 80B(5) READ WITH SECTION 80AB OF THE ACT AND IS THE NET FIGURE. 49. SECTION 80P(2)(A)(I) OF THE ACT PERMITS A CO-OP ERATIVE SOCIETY ENGAGED IN CARRYING ON THE BUSINESS OF BANKING OR PROVIDING CR EDIT FACILITIES TO ITS MEMBERS TO CLAIM DEDUCTION OF THE WHOLE OF THE AMOUNT OF PROFI TS AND GAINS OF BUSINESS ATTRIBUTABLE TO SUCH ACTIVITY, VIZ, BUSINESS OF BANKING OR PROV IDING CREDIT FACILITIES TO ITS MEMBERS. ON A PLAIN READING, IT BECOMES APPARENT THAT THE TW O ACTIVITIES ARE DISTINCT AND SEPARATE ACTIVITIES. THE FIRST ACTIVITY VIZ. CARRYI NG ON THE BUSINESS OF BANKING CONNOTES A LARGER ACTIVITY THAN THE ACTIVITY OF PROVIDING CRED IT FACILITIES TO ITS MEMBERS. THE LATTER IS RESTRICTED QUA THE MEMBERS OF THE SOCIETY WHILE THE FORMER IS WIDE ENOUGH TO TAKE WITHIN ITS SWEEP AS ITS POTENTIAL CUSTOMERS BOTH ME MBERS AND NON-MEMBERS . THE INTERPRETATION CANVASSED BY THE REVENUE THAT THE LA TTER PHRASE HAS A RESTRICTIVE EFFECT ON THE FORMER EXPRESSION BUSINESS OF BANKING IGNO RES THE WORD OR WHICH OCCURS BETWEEN THE TWO PHRASES. THERE IS NO WARRANT FOR RE ADING THE WORD OR AS AND. ONCE THE LEGISLATURE HAS USED THE TERM OR, THE LO GICAL CONSEQUENCE THAT FLOWS FROM THE CONTEXTUAL SETTING IS THAT IT PROVIDES FOR AN A LTERNATIVE, A DIFFERENT DISTINCT ACTIVITY. .. 53. IN THE LIGHT OF THE ABOVE DECISION WHEN THE INV ESTMENTS ARE MADE IN SECURITIES, WHICH ARE A PERMISSIBLE MODE OF INVESTM ENT, EITHER UNDER THE BR ACT OR THE GCS ACT READ WITH THE INDIAN TRUSTS ACT, INCOME ARI SING THEREFROM WOULD BE ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 5 | P A GE ATTRIBUTABLE TO THE BUSINESS OF BANKING AND THE ASS ESSEE WOULD BE ELIGIBLE FOR DEDUCTION IN TERMS OF SECTION 80P(2)(A)(I) OF THE ACT. 54. THE DISPUTE THEREFORE IS AS TO WHAT CONSTITUTES BUSINESS OF BANKING; BECAUSE THE WHOLE OF THE AMOUNT OF PROFITS AND GAIN S OF BUSINESS ATTRIBUTABLE TO BUSINESS OF BANKING IS DEDUCTIBLE WHILE COMPUTING T HE TOTAL INCOME OF AN ASSESSEE, WHERE AN ASSESSEE IS A CO-OPERATIVE SOCIETY. THEREF ORE, A TWOFOLD INQUIRY IS CONTEMPLATED : FIRSTLY, WHAT IS THE MEANING TO BE A SSIGNED TO THE PHRASE BUSINESS OF BANKING; AND SECONDLY, WHAT WOULD BE THE PROFITS AN D GAINS ATTRIBUTABLE TO BUSINESS OF BANKING. . 58. . THEREFORE, ON THE ONE HAND, AN ENTI TY CARRYING ON THE BUSINESS OF BANKING IS REQUIRED TO ACCEPT DEPOSITS WHICH ARE REPAYABLE ON DEMAND OR PERMITTING WITHDRAWAL IN ANY OF THE SPECIFIED MODES , AND ON THE OTHER HAND, THE FUNDS GENERATED BY ACCEPTANCE OF DEPOSITS ARE AVAILABLE F OR THE PURPOSE OF LENDING OR INVESTMENT. IN A GIVEN CASE, A BANK MAY ACCEPT DEPO SITS AND MERELY INVEST THEM, AND EARN PROFITS FROM THE DIFFERENCE BETWEEN THE RATES OF INTEREST PAID ON THE DEPOSITS AND EARNED ON THE INVESTMENTS. OR, THE BANK MAY ACCEPT DEPOSITS AND LEND THE FUNDS, AND AGAIN EARN PROFITS ON THE BASIS OF DIFFERENCE IN RA TE OF INTEREST ON THE BORROWINGS MADE AND ADVANCES GIVEN. OR A THIRD SITUATION, WHICH CLE ARLY A PRUDENT BANKER WOULD ENGAGE HIMSELF IN, WOULD BE WHERE DEPOSITS ARE ACCE PTED, AND CERTAIN PORTION THEREOF IS INVESTED AND THE BALANCE ADVANCED. UNDER THE PROVIS IONS OF THE BR ACT EVERY BANKING COMPANY, INCLUDING A CO-OPERATIVE SOCIETY CARRYING ON THE BUSINESS OF BANKING, IS REQUIRED TO OBTAIN A LICENCE FROM THE RESERVE BANK, MAINTAIN A CERTAIN PERCENTAGE OF ITS ASSETS IN SPECIFIED SECURITIES AND MOST IMPORTA NTLY, FILE NECESSARY RETURNS AT PERIODICAL INTERVALS AS STIPULATED BY THE BR ACT. S IMILARLY, THE ACCOUNTS OF THE SOCIETY, INCLUDING THE BALANCE-SHEET, ARE REQUIRED TO BE PRE PARED IN THE MANNER SPECIFIED AND ARE SUBJECT TO INSPECTION, AUDIT AND REGULATION BY THE RESERVE BANK OF INDIA. THESE PROVISIONS INDICATE AN ENTITY CARRYING ON BUSINESS OF BANKING IS NOT ABSOLUTELY OR WHOLLY FREE; IS AMENABLE TO SUPERVISION / REGULATIO N. IN OTHER WORDS, ITS INVESTMENTS ARE SUBJECTION TO SCRUTINY; AND ANY IMPERMISSIBLE INVES TMENT WILL NOT BE PERMITTED TO CONTINUE, IF MADE, BY THE REGULATOR, I.E. THE RESER VE BANK OF INDIA. 66. IN THE CASE OF PUNJAB CO-OPERATIVE BANK LTD. VS . CIT [1940] 8 ITR 635 THE PRIVY COUNCIL STATED (HEADNOTE): IN THE ORDINARY CASE OF A BANK THE BUSINESS CONSISTS IN ITS ESSENCE OF DEALING WITH MONEY AND CREDIT. TH E BANKER HAS ALWAYS TO KEEP ENOUGH CASH OR EASILY REALISABLE SECURITIES TO MEET ANY PR OBABLE DEMAND BY DEPOSITORS, AND IF SOME OF THE SECURITIES ARE REALISED IN ORDER TO MEE T WITHDRAWALS BY DEPOSITORS, THIS IS CLEARLY A NORMAL STEP IN CARRYING ON THE BANKING BU SINESS, IN OTHER WORDS, IT IS AN ACT DONE IN WHAT IS TRULY THE CARRYING ON OF THE BANKIN G BUSINESS. 67. THIS VIEW WAS REITERATED WITH EMPHASIS BY THE A PEX COURT IN THE CASE OF BIHAR STATE CO-OPERATIVE BANK LTD. VS. CIT (1960) 39 ITR 114 WHEREIN IT WAS OBSERVED (PAGE 122): IT IS A NORMAL MODE OF CARRYING ON BANKING BUSINESS TO INVEST MONEYS IN A MANNER THAT THEY ARE READILY AVA ILABLE AND THAT IS JUST AS MUCH A PART OF THE MODE OF CONDUCTING A BANK'S BUSI NESS AS RECEIVING DEPOSITS OR LENDING MONEYS OR DISCOUNTING HUNDIES O R ISSUING DEMAND DRAFTS. ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 6 | P A GE THAT IS HOW THE CIRCULATING CAPITAL IS EMPLOYED AND THAT IS THE NORMAL COURSE OF BUSINESS OF A BANK. THE MONEYS LAID OUT, IN THE FORM OF DEPOSITS AS IN THE INSTANT CASE WOULD NOT CEASE TO BE A PART OF THE CI RCULATING CAPITAL OF THE APPELLANT NOR WOULD THEY CEASE TO FORM PART OF ITS BANKING BUSINESS. THE RETURNS FLOWING FROM THEM WOULD FORM PART OF ITS PR OFITS FROM ITS BUSINESS. IN A COMMERCIAL SENSE THE DIRECTORS OF THE COMPANY OWE IT TO THE BANK TO MAKE INVESTMENTS WHICH EARN THEM INTEREST INSTEAD OF LET TING MONEYS LIE IDLE. IT CANNOT BE SAID THAT THE FUNDS OF THE BANK WHICH WER E NOT LENT TO BORROWERS BUT WERE LAID OUT IN THE FORM OF DEPOSITS IN ANOTHE R BANK TO ADD TO THE PROFIT INSTEAD OF LYING IDLE NECESSARILY CEASED TO BE A PA RT OF THE STOCK-IN-TRADE OF THE BANK, OR THAT THE INTEREST ARISING THEREFROM DI D NOT FORM PART OF ITS BUSINESS PROFITS.(EMPHASIS SUPPLIED) . 69. THE QUESTION THEREFORE WOULD ARISE AS TO WHETHE R ANY DISTINCTION CAN BE DRAWN BETWEEN SO-CALLED SURPLUS FUNDS / IDLE FUN DS AND STATUTORY INVESTMENTS. IT IS NECESSARY TO BEAR IN MIND THAT A RESERVE PER SE DOES NOT YIELD ANY INCOME. IT IS THE INVESTMENT OF THE FUND BACKING A RESERVE WHICH WOULD YIELD INCOME. THEREFORE, WHATEVER BE THE NOME NCLATURE OF A PARTICULAR RESERVE, THE FUNDS OF AN ASSESSEE IN TOTALITY ARE C ONGLOMERATE OF THE TOTAL AMOUNT OF DEPOSITS / INVESTMENTS, PROFITS AND OTHER REALIZATIONS. MONEY HAS NO COLOUR AND THE NOMENCLATURE USED TO SEGREGATE DI FFERENT FUNDS IS ONLY FOR THE SAKE OF ADMINISTRATIVE CONVENIENCE. OTHERWISE I T IS NOT POSSIBLE TO STATE THAT A PARTICULAR PORTION OF THE FUND EMANATES FROM THE DEPOSITS RECEIVED OR FROM THE PROFITS EARNED IN THE EARLIER YEARS. THUS, THESE FUNDS ARE UTILIZED, ARE INVESTED, TO EARN FURTHER PROFITS BY WAY OF INTERE ST. THE ONLY CAVEAT, AS CAN BE SEEN RUNNING THROUGH THE ENTIRE CASE LAW COMMENC ING FROM THE PRIVY COUNCIL DECISION IS THAT SUCH FUNDS MUST BE INVESTE D IN EASILY REALIZABLE SECURITIES. THE TWIN OBJECTIVES AS LAID DOWN BY THI S COURT IS NOT TO LOSE INTEREST BY KEEPING THE FUNDS IDLE AND INVESTED IN SECURITIES SO AS TO ENCASH THEM READILY IN THE CASE OF NEED. THIS IS IN CONSON ANCE WITH THE DEFINITION OF THE TERM BANKING. THE DEPOSITS ARE ACCEPTED AS PA YABLE ON DEMAND OR OTHERWISE, AND ALSO PERMITTING WITHDRAWAL BY CHEQUE S AND OTHER PRESCRIBED MODES. 70. HOWEVER, THE BUSINESS OF BANKING IS PRIMARILY A BUSINESS IN TRUST, A BUSINESS OF PUTTING TRUST IN A BANKER. HOW DOES A B ANK ENSURE THAT THE CUSTOMER PLACES TRUST. IT HAS TO OFFER NOT ONLY GO OD RETURNS BUT ALSO SAFETY AND LIQUIDITY. IN OTHER WORDS, THE DEPOSITOR MUST B E ENSURED THAT THE DEPOSITOR WILL GET GOOD RETURNS ON ITS DEPOSIT, THE DEPOSITS WOULD BE SAFE AND DEPOSITS WOULD BE AVAILABLE FOR WITHDRAWAL AS AND W HEN REQUIRED, SUBJECT TO THE TERMS OF THE CONTRACT BETWEEN THE PARTIES. IT I S IN THIS CONTEXT THAT THE REQUIREMENT OF INVESTMENT BEING IN EASILY REALISABL E SECURITIES OR MONEY BEING READILY AVAILABLE FOR MEETING THE DEMAND MADE BY THE DEPOSITOR IS TAKEN AS THE TOUCHSTONE OF THE BUSINESS OF BANKING. 71. THE DEPOSITOR IS NOT AWARE OF THE DEFINITION OF THE TERM BANKING AS PROVIDED UNDER THE BR ACT NOR IS HE CONCERNED WITH THE SAME. HIS ONLY CONCERN IS TO PLACE HIS FUNDS WITH A BANK, WHICH IN COMMON PARLANCE IS DEFINED AS A FINANCIAL ESTABLISHMENT WHICH USES MON EY DEPOSITED BY THE CUSTOMER FOR INVESTMENT, PAYS IT OUT WHEN REQUIRED, MAKES LOANS AT INTEREST, EXCHANGES CURRENCY, ETC. WHEN THE TERM BANK IS US ED AS A VERB IN ITS TRANSITIVE FORM IT WOULD TAKE WITHIN ITS SWEEP DEPO SIT OF MONEY OR VALUABLES ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 7 | P A GE IN A BANK. THE PHRASE BANK ON INDICATES TO RELY O N. THUS, A DEPOSITOR BANKS ON A PARTICULAR BANK OR A BANKER WHILE MAKING DEPOSIT IN THE BANK. THE ONLY WAY THE DEPOSITOR GAINS CONFIDENCE, PLACES REL IANCE ON, OR BANKS UPON A PARTICULAR ESTABLISHMENT, IS BY LOOKING AT THE TOTA L OF THE ASSETS OF THE BANK CONCERNED. THE ASSETS WOULD INCLUDE ALL INVESTMENTS NET OF LIABILITIES. IN OTHER WORDS A BALANCE SHEET WHICH REFLECTS SOUND FINANCI AL HEALTH OF A BANK WOULD GET PREFERENCE OVER AN ESTABLISHMENT WHOSE BANKER I S REQUIRED TO INVEST IN VARIOUS MODES, INCLUDING IN SECURITIES OF DIFFERENT KINDS TO CARRY ON THE BUSINESS OF BANKING. IT IS IN THIS CONTEXT THAT TH E CONCEPT OF EASILY REALIZABLE SECURITIES, INVESTMENTS WHEREFROM MONEYS ARE READIL Y AVAILABLE, COMES INTO THE SPHERE OF BANKING. THE BUSINESS IS NOT ONLY TO BE TRANSACTED BY A BANKER ALONE. THE CUSTOMER IS AN EQUALLY VITAL COMPONENT O F SUCH A BUSINESS AND IT IS THE TRUST THAT HE HAS IN A PARTICULAR ESTABLISHMENT WHICH ULTIMATELY PERMITS THE ESTABLISHMENT TO CARRY ON THE BUSINESS OF BANKI NG. THUS, ALL INVESTMENTS, EVEN IF ONE ACCEPTS THE REVENUES ARTIFICIAL DISTIN CTION, SURPLUS OR NOT, ARE ESSENTIAL AND CONDUCIVE TO THE PROMOTION OR ADVANCE MENT OF THE BUSINESS OF BANKING. . 6. THEREAFTER THE HONBLE GUJRAT HIGH COURT AFTER S UMMARIZING THE ORDER HAD HELD THAT : (I).. (II). (III) (IV) AS PER THE SCHEME OF THE INCOME TAX ACT, THE N ET INCOME RELATABLE TO A PARTICULAR HEAD OR ITEM HAS TO GO IN AS A COMPONENT OF THE GROSS TOTAL INCOME BEFORE ANY DEDUCTION UNDER CHAPTER-VI A IS ALLOWED; (V) IN THE CASE OF AN ASSESSEE CARRYING ON THE BUSI NESS OF BANKING INCOME UNDER SECTION 28 IS COMPUTED IN ACCORDANCE WITH PROVISIONS OF SECTION 2 9 OF THE INCOME TAX ACT AND THE NET FIGURE IS TAKEN AS A COMPONENT OF THE TOTAL INCOME OR GROSS TOTAL INCOME FOR THE PURPOSE OF DEDUCTION UNDER CHAPTER VI-A; (VI) IN THE CASE OF AN ASSESSEE, LIKE THE PRESENT A SSESSEE, ALL INTEREST INCOME, ACTUALLY RECEIVED OR ACCRUED, HAS TO BE COMPUTED IN THE MANNER PROVID ED IN THE ACT SO AS TO FORM THE TOTAL INCOME WHICH IS SUBJECTED TO CHARGE UNDER SECTION 4 OF THE ACT; (VII) THE ORDER OF THE APEX COURT CANNOT AND SHOULD NOT BE CONSTRUED IN A MANNER SO AS TO BE INCONSISTENT WITH THE PROVISIONS OF THE STATUTE AS THE APEX COURT COULD NOT HAVE CONTEMPLATED PASSING AN ORDER CONTRARY TO THE PROVISIONS OF THE ACT; (VIII) THUS THE DIRECTION BY THE SUPREME COURT CAN ONLY MEAN ASCERTAINMENT OF UTILIZATION OF NET INCOME OF EARLIER YEARS, WHICH FORMS PART OF TH E FUNDS WHICH ARE INVESTED, AND GIVEN THE NOMENCLATURE OF VOLUNTARY RESERVES; (IX) UNDER SECTION 80P(2)(A)(I) OF THE ACT THE TWO ACTIVITIES VIZ., BUSINESS OF BANKING OR PROVIDING CREDIT FACILITIES TO ITS MEMBERS, ARE DIS TINCT AND SEPARATE ACTIVITIES; THE FORMER CONNOTES A LARGER ACTIVITY THAN THE ACTIVITY OF PRO VIDING CREDIT FACILITIES TO ITS MEMBERS; ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 8 | P A GE (X) THE PROVISION OF SECTION 80P HAS BEEN INTRODUCE D ON THE STATUTE BOOK TO ENCOURAGE AND PROMOTE GROWTH OF THE CO-OPERATIVE SECTOR IN THE EC ONOMIC LIFE OF THE COUNTRY; (XI) WHEN INVESTMENTS ARE MADE IN SECURITIES, IN PE RMISSIBLE MODE OF INVESTMENTS, UNDER THE BR ACT OR THE GCS ACT READ WITH THE INDIAN TRUSTS A CT INCOME ARISING THEREFROM WOULD BE ATTRIBUTABLE TO THE BUSINESS OF BANKING, AND ELIGIB LE FOR DEDUCTION UNDER SECTION 80P(2)(A)(I) OF THE ACT; (XII) DEFINITION OF WORKING CAPITAL UNDER SECTION 2(24) OF THE GCS ACT CANNOT BE RESTRICTED TO MEAN MONEY RAISED BY BORROWING; (XIII) (XIV) (XV) SECTION 80P(2)(A)(I) OF THE ACT REQUIRES A CO- OPERATIVE SOCIETY, AND NOT A CO-OPERATIVE BANK DEFINED UNDER THE GCS ACT, TO BE ENGAGED IN CA RRYING ON BUSINESS OF BANKING; HENCE, IT IS NOT POSSIBLE TO RESTRICT THE SCOPE OF THE BUSINE SS TO THE DEFINITION OF BANKING UNDER SECTION 5(B) OF THE BR ACT; (XVI). (XVII).. (XVIII).. (XIX).. (XX) WHATEVER BE THE NOMENCLATURE OF A RESERVE, THE FUNDS OF AN ASSESSEE IN TOTALITY ARE CONGLOMERATE OF THE TOTAL AMOUNT OF DEPOSITS / INVE STMENTS, PROFITS AND OTHER REALIZATIONS; (XXI) THE REQUIREMENT OF INVESTMENT BEING IN EASILY REALIZABLE SECURITIES OR MONEY BEING READILY AVAILABLE FOR MEETING THE DEMAND MADE BY TH E DEPOSITOR IS TAKEN AS THE TOUCHSTONE OF THE BUSINESS OF BANKING TO ENSURE THAT THE DEPOSITO R GETS GOOD RETURNS ACCOMPANIED BY SAFETY AND LIQUIDITY; (XXII) ALL INVESTMENTS, SURPLUS OR NOT, ARE ESSENTI AL AND CONDUCIVE TO THE PROMOTION OR ADVANCEMENT OF THE BUSINESS OF BANKING WHEN CONSIDE RED FROM THE VIEW POINT OF A DEPOSITOR.[EMPHASIS GIVEN BY US] 7. IN THE LIGHT OF THE RATIO LAID BY THE HONBLE HI GH COURT IN CIT VS. BARODA PEOPLES CO-OPERATIVE BANK (SUPRA) WE FIND MERIT IN THE SUBMISSION OF THE LD. A.R THAT THE LD PCIT HAS ERRED IN RELYING ON THE DECISION OF HONBLE SUPREME COURT IN TOTGARS CO-OPERATIVE SALES SOCIETY LTD. (SUPRA) SI NCE IT WAS IN RESPECT OF SOCIETY PROVIDING CREDIT FACILITIES TO ITS MEMBERS AND NOT AN ASSESSEE WHICH IS A BANK. THEREFORE WE FIND THAT THE LD PCIT ERRED IN RELYING ON THE DECISION OF HONBLE SUPREME COURT IN TOTGARS CO-OPERATIVE SALES SOCIET Y LTD. (SUPRA) AND HIS DECISION THAT THE ASSESSMENT ORDER IS ERRONEOUS AND PREJUDIC IAL TO THE INTEREST OF JUSTICE CANNOT BE ACCEPTED. IN THE LIGHT OF JUDICIAL PRECEDENCE LA ID DOWN BY THE HONBLE APEX COURT ITA NO. 271/KOL/2018 BANSABATI CO-OPERATIVE BANK LTD. A.Y. 2012-13 9 | P A GE IN MALABAR INDUSTRIES LTD. VS. CIT [2000] 243 ITR 8 3(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. IN THI S CASE, WE NOTE THAT THE VIEW OF ASSESSING OFFICER CANNOT BE HELD TO BE ERRONEOUS, S INCE SECTION 80P DEDUCTION HAS BEEN CORRECTLY GRANTED BY THE ASSESSING OFFICER IN CONSONANCE WITH THE RATIO OF THE DECISION OF HONBLE GUJRAT HIGH COURT IN CIT VS. BA RODA PEOPLES CO-OPERATIVE BANK LTD. (SUPRA), SO THE VIEW OF AO IS A PLAUSIBLE VIE W AND THEREFORE LD. PCIT ERRED IN INVOKING THE REVISIONAL JURISDICTION U/S 263 OF THE ACT WITHOUT SATISFYING THE CONDITION PRECEDENT ESSENTIAL TO INVOKE REVISIONAL JURISDICTI ON. IN SUCH A SCENARIO, THE LD PCIT OUGHT NOT TO HAVE INVOKED THE POWER U/S 263 OF THE ACT AND THEREFORE, THE INVOKING OF THE REVISIONAL JURISDICTION ITSELF IS HELD TO BE BA D IN LAW AND THEREFORE QUASHED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 03.12.202 0. SD/- SD/- (J(( (J. S. REDDY) (A. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 03.12.2020 SB, SR. PS COPY OF THE ORDER FORWARDED TO: 1. APPELLANT- BANSABATI CO-OPERATIVE BANK LTD., 13, VI VEKANANDA ROAD, P.O.- BANSBERIA, HOOGHLY-712502 2. RESPONDENT- PCIT-8, KOLKATA 3. THE CIT(A)- , KOLKATA (SENT THROUGH E-MAIL) 4. CIT- , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES, KOLKATA