Rajmata Urban Co-op Bank Ltd., Solapur V. ITO, Pandharpur

ITA 479/PUN/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3210 (ITAT-PUNE)
• Duration Of Justice: 6 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2003-2004
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANT KUMAR LEUVA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 479/PN/10 (ASSTT. YEAR 2003-04) RAJMATA URBAN CO-OP BANK LIMITED MAIN ROAD, MURLIDHAR CHOWK, MANGALWEDHA, DIST. SOLAPUR-413305 PAN NO. AAAAR1900K .... APPELLANT VS. ITO WARD 1(3) PANDHARPUR . RESPONDENT APPELLANT BY : NONE RESPONDENT BY : SHRI HEMANT KUMAR LEUVA ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E CIT(A)-III, PUNE DATED 06/01/2010 FOR THE ASSESSMENT YEAR 2003-04. NON E APPEARED ON BEHALF OF THE ASSESSEE. THE EFFECTIVE GROUND RAISED BY THE ASS ESSEE IN THE APPEAL READ AS UNDER: 1. TO TREAT THE INCOME FROM VOLUNTARY RESERVES AS INCOME FROM NON BANKING BUSINESS . 2. THE ASSESSEE IS A CO-OPERATIVE BANK REGISTERED UNDE R THE MAHARASHTRA CO- OP. SOCIETIES ACT AND INVESTED THE SAID RESERVES AND EARN INTEREST INCOME AND CLAIMED EXEMPT U/S 80P(2)(A)(I) OF THE ACT. REVENUE DID NOT ENTERTAIN THE CLAIM HOLDING THAT SAID INCOME CONSTITUTES INCOME DERIVED FROM THE NON BANKING BUSINESS ACTIVITIES. AGGRIEVED WITH THE SAID DECISIO N OF THE REVENUE, THE ASSESSEE FILED THIS BEFORE US. 3. DURING THE PROCEEDINGS BEFORE, NONE FOR THE ASSESSEE WAS PRESENT. ON THE OTHER HAND, LD DR HELPED US TO UNDERSTAND THE FACTS O F THE CASE AND OF COURSE, ITA NO. 479/PN/10 A.Y: 2003-04 PAGE 2 OF 4 HE STRONGLY RELIED ON THE ORDERS OF THE REVENUE. WE HAV E CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE LIGHT OF MATERIAL ON RECORD AND THE PRECEDENTS CITED. WE FIND THAT THE ISSUE INVOLVED IN THIS CASE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENTS OF THE SUPREME COURT IN THE FOLLOWING CASES: I) CIT VS. NAWASHANKAR CENTRAL CO-OP. BANK LTD. (2007) 2 89 ITR 6 (SC) II) CIT VS. RAMANATHAPURAM DIST. CO-OP. CENTRAL BANK LT D. (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) OBSERVED 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 O N INVESTMENTS IN GOVERNMENT SECURITIES, FIXED DEPOSITS, KVPS AND IVPS, INVESTMENTS IN UTI, ETC. OUT OF SURPLUS/IDLE MONEY AVAILABLE FROM WORKIN G CAPITAL INCLUDING VOLUNTARY RESERVES , EXCESS COLLECTION OF INTEREST TAX AND LOCKER RENT ARE ALL INCOME ATTRIBUTABLE TO BUSINESS OF BANKING AND ARE ELIGIBLE 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 TRADIN G 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 ( SUPRA) THE HONBLE THIRD MEMBER OF I.T.A.T AGRA BENCH HAS HELD THAT AC QUIRING AND HOLDING OF SECURITIES AND INVESTMENTS OF ALL KINDS, WHICH IS A BUSINESS PERMITTED TO BE CARRIED ON BY A REGIONAL RURAL BANK U/S 6(1)(A) OF BANKI NG REGULATION ACT, READ WITH SECTION 18(1) OF REGIONAL RURAL BANKS ACT, IS A N ACTIVITY WHICH IS CLOSELY AND INEXTRICABLY CONNECTED WITH BUSINESS OF BANKING AND AS SUCH ACTIVITY OF INVESTING EITHER IN SLR OR IN NON-SLR INVESTMENT CANNOT BE DIVO RCED FROM BUSINESS OF BANKING. 7. SIMILAR VIEW TAKEN BY CO-ORDINATE BENCH OF THIS TRI BUNAL IN THE CASE OF SOLAPUR NAGARI AUDYOGIC SAHAKARI BANK LTD. IN ITA NO. 355/PN/2006 TO 357/PN/2006 FOR A.Y. 1994-95, 1995-96 AND 1998-99 VI DE ITS ORDER DATED 27-7- 2007 WAS UPHELD BY HON'BLE JURISDICTIONAL HIGH COURT IN INCOME-TAX APPEAL NO. ITA NO. 479/PN/10 A.Y: 2003-04 PAGE 3 OF 4 46 OF 2008 ETC. IN THE CASE OF CIT VS. SOLAPUR NAGARI AUDYOGIC SAHAKARI BANK LTD. VIDE ITS JUDGMENT DATED 16-6-2009. 8. 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. B ANK LTD. REPORTED IN (2006) 280 ITR 282 (GUJ) WHERE THE TRUE IMPORT AND MEANING OF THE 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 HAVE ANY INDEPENDENT EXISTENCE THEREAFTER IN THE LIGHT OF TH E PRINCIPLES OF MERGER. THE JUDGMENT AND ORDER OF THE HIGH COURT WOULD STAN D MERGED IN THE JUDGMENT AND ORDER OF THE SUPREME COURT ESPECIALLY IN A CASE WHERE THE ISSUE IN QUESTION IS DIRECTLY CONSIDERED BY THE SUP REME COURT.THE DECISION IN GUJARAT STATE CO-OP. BANK LTD. VS. CIT (2001) 25 0 ITR 229 (GUJ) WAS CONSIDERED BY THE SUPREME COURT IN MEHSANA DIST. CE NTRAL CO-OP. BANK LTD. VS. ITO (2001) 251 ITR 522 AND HAS MERGED IN IT . THE ORDER OF THE SUPREME COURT COULD NOT AND SHOULD NOT BE CONSTRUED AS THE SUPREME COURT COULD NOT HAVE CONTEMPLATED PASSING AN ORDER CONTRARY TO THE PROVISIONS OF THE ACT. THE DIRECTION OF THE SUPREME COURT IN MEHSANA DIST. CENTRAL CO-OP. BANKS CASE (2001) 251 ITR 522, CAN ONLY REFER TO ASCERTAINMENT OF UTILIZATION OF NET INCOME OF EARLI ER YEARS, WHICH FORMS PART OF THE FUNDS WHICH ARE INVESTED 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 SAROVA R NARMADA BONDS AND (IV) KISAN VIKAS PATRA. THE A.O TREATED ALL THE AF ORESAID INVESTMENTS AS FIXED CAPITAL AND HELD THAT THE INVESTMENTS WERE NO T AVAILABLE FOR NORMAL BANKING BUSINESS. THEREFORE, THE ENTIRE INCOME TAX TAXABLE. THE SPECIAL BENCH OF THE TRIBUNAL HELD THAT THE INCOME WAS ENTI TLED TO SPECIAL 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 . 9. 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 . ITA NO. 479/PN/10 A.Y: 2003-04 PAGE 4 OF 4 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 28 TH OCTOBER, 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. ITO, WARD 1(3), PANDHARPUR 3. CIT(A)-III, PUNE 4. CIT-IV, PUNE 5. D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE