ITO, Trivandrum V. Kerala State Co-op Bank Ltd, Trivandrum

ITA 546/COCH/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64864 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 11 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-10-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 14-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VENI RAJ
• Assessee Lawyers: DEVARAJAN
• Keywords: Business income
• Section: 6

Judgement Text

1 ITA NO.546/COCH/2010 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKARA N(AM) I.T.A NO. 546/COCH/2010 (ASSESSMENT YEAR 2006-07) ITO, WD.1(1) VS M/S KERALA STATE CO-OP. BANK LTD TRIVANDRUM PALAYAM, TRIVANDRUM PAN : AAAAK4255G (APPELLANT) (RESPONDENT) APPELLANT BY : MS. VENI RAJ RESPONDENT BY : SHRI DEVARAJAN DATE OF HEARING : 09-08-2012 DATE OF PRONOUNCEMENT : 12-10-2012 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE REVENUER IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX(A)-I, TRIVANDRUM DATED 14 -07-2010 FOR THE ASSESSMENT YEAR 2006-07. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DEDUC TION U/S 80P(2)(A)(I) OF THE ACT IN RESPECT OF RENTAL INCOME RECEIVED BY THE TAX PAYER. 3. MS. VENI RAJ, THE LD.DR SUBMITTED THAT THE TAXPA YER HAS RECEIVED RENTAL INCOME OF RS.27,12,152 AND CLAIMED THE SAME AS DEDU CTION U/S 80P(2)(A)(I). REFERRING TO THE PROVISIONS OF SECTION U/S 80P(2)(A )(I) THE LD.DR POINTED OUT THAT 2 ITA NO.546/COCH/2010 THE INCOME OF THE TAXPAYER FROM BANKING ACTIVITY OR SUCH OTHER ACTIVITY WHICH IS ATTRIBUTABLE TO THE BANKING ACTIVITY ALONE IS ELIGIB LE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. LETTING OUT OF PROPERTY, ACCORDING TO THE LD.DR, IS NOT THE BUSINESS OF THE TAXPAYER. MOREOVER, LETTING OUT OF THE PROPERT Y IS NOT IN ANY WAY ATTRIBUTABLE TO BANKING BUSINESS. THEREFORE, RENTAL INCOME RECEI VED BY THE TAXPAYER CANNOT BE TREATED AS BUSINESS INCOME FOR THE PURPOSE OF GR ANTING DEDUCTION U/S 80P(2)(A)(I). THE LD.DR PLACED HER RELIANCE ON THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF KOTTAYAM LAND MORTGAGE CO-O PERATIVE LAND MORTGAGE BANK LTD VS COMMISSIONER OF INCOME-TAX (1988) 172 I TR 43 (KER) AND ALSO THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALES SOCIETY LTD VS COMMISSIONER OF INCOME-TAX (2010) 322 ITR 283 (SC ). 4. ON THE CONTRARY, SHRI V DEVARAJAN, THE LD.REPRES ENTATIVE FOR THE TAXPAYER SUBMITTED THAT THE TAXPAYER HAS LET OUT THE COMMERC IAL PREMISES / ASSET. THEREFORE, THE RENTAL INCOME RECEIVED ON LETTING OU T OF THE COMMERCIAL ASSET HAS TO BE TREATED AS BUSINESS INCOME ATTRIBUTABLE TO TH E BUSINESS OF THE TAXPAYER, THEREFORE, ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE LD.REPRESENTATIVE HAS PLACED HIS RELIANCE ON THE JUDGMENT OF THE MADR AS HIGH COURT IN COMMISSIONER OF INCOME-TAX VS MADURAI DIST. CO-OPERAT IVE BANK LTD (1999) 239 ITR 700 (MAD) AND THE KARNATAKA HIGH COURT IN COMMISS IONER OF INCOME-TAX VS THE GRAIN MERCHANTS CO-OPERATIVE BANK LTD (2004) 267 ITR 42 (KAR). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE CAREFULLY GONE THROUG H THE PROVISIONS OF SECTION 80P(1) AND 80P(2) OF THE ACT WHICH READ AS FOLLOWS: 3 ITA NO.546/COCH/2010 80P. (1) WHERE, IN THE CASE OF AN ASSESSEE BEING A CO-OPERATIVE SOCIETY, THE GROSS TOTAL INCOME INCLUDES ANY INCOME REFERRED TO IN SUB-SECTION (2), THERE SHALL BE DEDUCTED, IN ACCORDA NCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, THE SUMS SPECIFIED IN SUB- SECTION(2), IN COMPUTING THE TOTAL INCOME OF THE AS SESSEE. (2) THE SUMS REFERRED IN SUB-SECTION (1) SHALL BE TH E FOLLOWING:- (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, SEEDS, LIVESTOCK OR OTHER ARTICLES INTENDED FOR AGRICULTURE FOR THE PURPOSE OF SUPPLYING 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 O R MARKETING OF FISH OR THE PURCHASE OF MATERIALS AND EQUIPMENT IN CONNECTION THEREWITH FOR THE PURPOSE OF SUPPLYING THEM TO ITS MEMBERS, THE WHOLE OF THE AMOUNT OF PROFITS AND GAINS OF BUSINESS ATTRIBUTABLE TO ANY ONE OR MORE OF SUCH ACTIVITIES: FROM THE ABOVE PROVISIONS OF SECTIONS 80P(1) AND 80 P(2) IT IS OBVIOUS THAT THE INCOME OF THE TAXPAYER FROM THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS AND ANY ACTIVITY WHICH ARE ATTRIBUTABLE TO BUSINESS OF BANKING ARE ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I). THE QUEST ION ARISES FOR CONSIDERATION IS WHETHER LETTING OUT THE PROPERTY IS ATTRIBUTABLE TO THE BUSINESS OF BANKING OR NOT? 4 ITA NO.546/COCH/2010 6. THE BUSINESS OF BANKING IS NOT DEFINED IN THE INC OME-TAX ACT. THEREFORE, WE HAVE TO NECESSARILY GO TO THE DEFINITION PROVIDE D IN BANKING REGULATION ACT WHICH DEFINES BANKING AS FOLLOWS: 5(B) BANKING MEANS THE ACCEPTING, FOR THE PURPOSE OF LENDING OR INVESTMENT, OF DEPOSITS OF MONEY FROM THE PUBLIC, R EPAYABLE ON DEMAND OR OTHERWISE, AND WITHDRAWAL BY CHEQUE, DRAF T, ORDER OR OTHERWISE. FURTHER TO THAT, WE FIND THAT FOR THE PURPOSE OF CO NSIDERING WHETHER AN ACTIVITY IS BANKING ACTIVITY OR NOT, IT IS NECESSARY THAT THE AC TIVITY OF A BANK FALLS UNDER ANYONE OF THE ACTIVITIES MENTIONED IN SECTION 6 OF THE BANKING REGULATION ACT OR IT SHOULD HAVE SOME NEXUS WITH THE ACTIVITIES WHICH AR E MENTIONED IN SECTION 6 OF THE BANKING REGULATIONS ACT. THIS SECTION 6 OF THE BANKING REGULATION ACT READS AS FOLLOWS: 6. FORMS OF BUSINESS IN WHICH BANKING COMPANIES MAY ENGAGE (1) IN ADDITION TO THE BUSINESS OF BANKING, A BANKI NG COMPANY MAY ENGAGED IN ANY ONE OR MORE OF THE FOLLOWING FORMS O F BUSINESS, NAMELY:- (A) THE BORROWING, RAISING OR TAKING UP OF MONEY, THE LE NDING OR ADVANCING OF MONEY EITHER UPON OR WITHOUT SECURITY; DRAWING, MAKING, ACCEPTING, DISCOUNTING, BUYING, SELLING, COL LECTING AND DEALING IN BILLS OF EXCHANGE, HOONDEES, PROMISSORY NOTES, COUPONS, DRAFT, BILLS OF LADING, RAILWAY RECEIPTS, WARRANTS, DEBENTURES, CERTIFICATES, SCRIPS AND OTHER INSTRUCT IONS, AND SECURITIES WHETHER TRANSFERABLE OR NEGOTIABLE OR NO T; THE GRANTING AND ISSUING OF LETTERS OF CREDIT, TRAVELLE RS CHEQUES AND CIRCULAR NOTES; THE BUYING SELLING AND DEALING IN B ULLION AND SPECIE; THE BUYING AND SELLING OF FOREIGN EXCHANGE INCLUDING FOREIGN BANK NOTES; THE ACQUIRING, HOLDING, ISSUING ON 5 ITA NO.546/COCH/2010 COMMISSION, UNDERWRITING AND DEALING IN STOCK, FUNDS , SHARES, DEBENTURES, DEBENTURE STOCK, BONDS, OBLIGATIONS, ECU RITIES AND INVESTMENTS OF ALL KINDS; THE PURCHASING AND SELLING OF BONDS, SCRIPS OR OTHER FORMS OF SECURITIES ON BEHALF OF CO NSTITUENTS OR OTHERS, THE NEGOTIATING OF LOANS AND ADVANCES; THE RECEIVING OF ALL KINDS OF BONDS, SCRIPS OR VALUABLES ON DEPOSIT O R FOR SAFE CUSTODY OR OTHERWISE; THE PROVIDING OF SAFE DEPOSIT VAULTS; THE COLLECTING AND TRANSMITTING OF MONEY AND SECURITIES ; (B) ACTING AS AGENTS OF ANY GOVERNMENT OR LOCAL AUTHORIT Y OR ANY OTHER PERSON OR PERSONS; THE CARRYING ON OF AGENCY BUSINESS OF ANY DESCRIPTION INCLUDING THE CLEARING AND FORWARDI NG OF GOODS, GIVING OF RECEIPTS AND DISCHARGES AND OTHERWISE ACT ING AS AN ATTORNEY ON BEHALF OF CUSTOMERS, BUT EXCLUDING THE BUSINESS OF A [MANAGING AGENT OR SECRETARY AND TREASURER] OF A CO MPANY; (C) CONTRACTING FOR PUBLIC AND PRIVATE LOANS AND NEGOTI ATING AND ISSUING THE SAME; (D) THE EFFECTING, INSURING, GUARANTEEING, UNDERWRITING , PARTICIPATING IN MANAGING AND CARRYING OUT OF ANY ISSUE, PUBLIC O R PRIVATE, OF STATE, MUNICIPAL OR OTHER LOANS OR OF SHARES, STOCK, DEBENTURES OR DEBENTURE STOCK OF ANY COMPANY, CORPORATION OR A SSOCIATION AND THE LENDING OF MONEY FOR THE PURPOSE OF ANY SUC H ISSUE; (E) CARRYING ON AND TRANSACTING EVERY KIND OF GUARANTEE AND INDEMNITY BUSINESS; (F) MANAGING, SELLING AND REALIZING ANY PROPERTY WHICH MAY COME INTO THE POSSESSION OF THE COMPANY IN SATISFACTION OR PART SATISFACTION OF ANY OF ITS CLAIMS; (G) ACQUIRING AND HOLDING AND GENERALLY DEALING WITH AN Y PROPERTY OR ANY RIGHT, TITLE OR INTEREST IN ANY SUCH PROPERT Y WHICH MAY FORM THE SECURITY OR PART OF THE SECURITY FOR ANY L OANS OR ADVANCES OR WHICH MAY BE CONNECTED WITH ANY SUCH SE CURITY; (H) UNDERTAKING AND EXECUTING TRUSTS; (I) UNDERTAKING THE ADMINISTRATION OF ESTATE AS EXECUTOR , TRUSTEE OR OTHERWISE; (J) ESTABLISHING AND SUPPORTING OR AIDING IN THE ESTABL ISHMENT SUPPORT OF ASSOCIATIONS, INSTITUTIONS, FUNDS, TRUST S, AND CONVENIENCES CALCULATED TO BENEFIT EMPLOYEES OR EX-E MPLOYEES OF THE COMPANY OR THE DEPENDENTS OR CONNECTIONS OF SUCH PERSONS; GRANTING PENSIONS AND ALLOWANCES AND MAKING PAYMENTS TOWARDS INSURANCE; SUBSCRIBING TO OR GUARA NTEEING 6 ITA NO.546/COCH/2010 MONEYS FOR CHARITABLE OR BENEVOLENT OBJECTS OR FOR ANY EXHIBITION OR FOR ANY PUBLIC GENERAL OR USEFUL OBJE CT; (K) THE ACQUISITION, CONSTRUCTION, MAINTENANCE AND ALTE RATION OF ANY BUILDING OR WORK NECESSARY OR CONVENIENT FOR THE PUR POSES OF THE COMPANY; (L) SELLING, IMPROVING, MANAGING, DEVELOPING, EXCHANGIN G, LEASING, MORTGAGING, DISPOSING OF OR TURNING INTO ACCOUNT OR OTHERWISE DEALING WITH ALL OR ANY PART OF THE PROPERTY AND RI GHTS OF THE COMPANY; (M) ACQUIRING AND UNDERTAKING THE WHOLE OR ANY PART OF T HE BUSINESS OF ANY PERSON OR COMPANY, WHEN SUCH BUSINE SS IS OF A NATURE ENUMERATED OR DESCRIBED IN THIS SUB-SECTION; (N) DOING ALL SUCH OTHER THINGS AS ARE INCIDENTAL OR CO NDUCIVE TO THE PROMOTION OR ADVANCEMENT OF THE BUSINESS OF THE COM PANY; (O) ANY OTHER FORM OF BUSINESS WHICH THE CENTRAL GOVERNM ENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZETTE, SPECIFY AS A FORM OF BUSINESS IN WHICH IT IS LAWFUL FOR A BANKING COMPAN Y TO ENGAGE. (2) NO BANKING COMPANY SHALL ENGAGE IN ANY FORM OF B USINESS OTHER THAN THOSE REFERRED TO IN SUB-SECTION (1). 7. A BARE READING OF THE SECTION 6 OF THE BANKING RE GULATIONS ACT CLEARLY SHOWS THAT THE LETTING OUT OF THE PROPERTY IN NO WA Y CONNECTS WITH THE BANKING BUSINESS OR PROVIDING CREDIT FACILITY. LETTING OUT THE PREMISES IS AN INDEPENDENT AND SEPARATE ACTIVITY FOR THE PURPOSE OF EXPLOITING THE LANDED PROPERTIES. THE COMMISSIONER OF INCOME-TAX(A) BY FOLLOWING THE JUDGM ENT OF THE MADRAS HIGH COURT IN MADURAI DIST. CO-OPERATIVE BANK LTD (SUPRA) AND THE KARNATAKA HIGH COURT IN THE GRAIN MERCHANTS CO-OPERATIVE BANK LTD (SU PRA) ALLOWED THE CLAIM OF THE TAXPAYER. 8. WE HAVE CAREFULLY GONE THROUGH THE JUDGMENT OF T HE MADRAS HIGH COURT IN THE CASE OF MADURAI DIST.CO-OPERATIVE BANK LTD (SUPRA ). IN THE CASE BEFORE THE MADRAS HIGH COURT, THE TAXPAYER, A CO-OPERATIVE BANK LET OUT THE MEETING HALL OF AND THE RENTAL INCOME WAS CLAIMED AS INCOME FROM B USINESS. THE MADRAS HIGH 7 ITA NO.546/COCH/2010 COURT, AFTER CONSIDERING THE JUDGMENT OF THE KERALA HIGH COURT IN KOTTAYAM CO- OPERATIVE LAND MORTGAGE BANK LTD (SUPRA) FOUND THAT THE REVENUE HAS CHALLENGED THE TREATMENT OF INCOME AS BUSINESS INCOME AND ONCE THE LETTING OUT OF THE PROPERTY WAS ASSESSED UNDER THE HEAD INCOME FROM B USINESS IT CAN ONLY BE SAID THAT LETTING OUT OF A COMMERCIAL ASSET IS A BUSINES S ACTIVITY AND ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. THE MADRAS HIGH COURT HAS DISTINGUISHED THE JUDGMENT OF THE KERALA HIGH COURT. 9. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMENT OF THE KARNATAKA HIGH COURT IN THE CASE OF THE GRAIN MERCHANTS CO-OPERATIVE BANK LTD (SUPRA). THE KARNATAKA HIGH COURT FOUND THAT RENTAL INCOME RECEIVE D BY A CO-OPERATIVE BANK IS INCOME RECEIVED IN THE COURSE OF BUSINESS OF BANKING AND AS SUCH ENTITLED FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT. 10. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE KERALA HIGH COURT IN KOTTAYAN CO-OPERATIVE LAND MORTGAGE BANK LTD (SUPRA). IN THE CASE BEFORE THE HIGH COURT, THE TAXPAYER CO-OPERATIVE SOC IETY WAS ENGAGED IN THE BUSINESS OF BANKING BY PROVIDING CREDIT FACILITIES T O ITS MEMBERS. THE TAXPAYER CONSTRUCTED A BUILDING TO HOUSE THE BANK AND THE ADM INISTRATIVE OFFICE. THE SURPLUS SPACE IN THAT BUILDING WAS LET OUT AND THE TAXPAYER CLAIMED THE RENTAL INCOME AS DEDUCTION U/S 80P(2)(C) OF THE ACT. THE KERALA HIGH COURT, AFTER CONSIDERING THE PROVISIONS OF SECTION 80P(2)(C) FOU ND THAT THE BUSINESS OF BANKING OR PROVIDING CREDIT FACILITY TO ITS MEMBERS FALLS U NDER CLAUSE (C) OF SECTION 80P(2). THE CLAIM OF EXEMPTION UNDER CLAUSE (C) IS IN ADDIT ION TO EXEMPTION PROVIDED UNDER CLAUSE (A). THE PROVISIONS OF CLAUSES (A) AN D (C) ARE CUMULATIVE AND MUTUALLY SUPPLEMENTING. THE KERALA HIGH COURT FURTH ER FOUND THAT THE LIMIT SPECIFIED IN CLAUSE (C) ARE IN RELATION TO PROFIT A ND GAIN ATTRIBUTABLE TO ACTIVITY 8 ITA NO.546/COCH/2010 OTHER THAN ONE SPECIFIED IN CLAUSE (A). THE KERALA HIGH COURT FURTHER FOUND THAT IF THE RENTAL INCOME RECEIVED BY THE SOCIETY IS ATTRIB UTABLE TO AN ACTIVITY OF THE SOCIETY THEN CLAUSE (C) WOULD BE ATTRACTED. THE KER ALA HIGH COURT FURTHER FOUND THAT DEDUCTION U/S 80P(2) IS AVAILABLE IN RESPECT O F INCOME OF THE CO-OPERATIVE SOCIETY WHICH ARE ATTRIBUTABLE TO THE ACTIVITY IN W HICH THE CO-OPERATIVE SOCIETY IS ENGAGED. THE KERALA HIGH COURT FURTHER FOUND THAT L ETTING OUT OF THE PROPERTY IS NOT AN ACTIVITY WHICH FALLS UNDER CLAUSE (C). LETT ING OUT OF THE PROPERTY IS NOT A COMMERCIAL ASSET AND THE PROFIT OR GAIN RECEIVED BY THE TAXPAYER IS NOT FROM EXPLOITATION OF COMMERCIAL ASSET. ACCORDINGLY, THE KERALA HIGH COURT HELD THAT THE RENTAL INCOME RECEIVED BY THE TAXPAYER ON LETTI NG OUT OF THE SURPLUS SPACE IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2). 11. IN THE CASE ON OUR HAND ALSO THE TAXPAYER HAS L ET OUT THE BUILDING. IT IS NOBODYS CASE THAT THE COMMERCIAL ASSET WAS EXPLOIT ED IN THE COURSE OF ITS BANKING ACTIVITY OR PROVIDING CREDIT FACILITY TO ITS MEMBERS. THEREFORE, LETTING OUT OF THE PROPERTY IS OTHER THAN ONE SPECIFIED IN SECT ION AND U/S 80P(2)(A)(I) AND 80P(2)(C). THEREFORE, THE RENTAL INCOME RECEIVED B Y THE TAXPAYER HAS TO BE ASSESSED AS INCOME FROM HOUSE PROPERTY AND IT IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) OF THE ACT AS HELD BY THE KERALA HIGH C OURT IN KOTTAYAM CO-OPERATIVE LAND MORTGAGE BANK LTD (SUPRA). THIS JUDGMENT OF TH E KERALA HIGH COURT IS BINDING ON ALL AUTHORITIES AND THIS TRIBUNAL. IT I S UNFORTUNATE THAT THE COMMISSIONER OF INCOME-TAX(A) HAS CHOSEN TO PLACE RE LIANCE ON THE JUDGMENT OF THE MADRAS HIGH COURT RATHER THAN THAT OF THE JURIS DICTIONAL HIGH COURT. THE LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IS BINDI NG ON ALL AUTHORITIES. THEREFORE, ALL AUTHORITIES IN THE STATE OF KERALA HAS TO PREFER TO FOLLOW THE JUDGMENT OF KERALA HIGH COURT RATHER THAN OTHER HIGH COURTS. THIS TRI BUNAL IS OF THE CONSIDERED 9 ITA NO.546/COCH/2010 OPINION THAT THE JUDGMENT OF THE KERALA HIGH COURT I N THE CASE OF KOTTAYAM CO- OPERATIVE LAND MORTGAGE BANK LTD IS SQUARELY APPLICA BLE TO THE FACTS OF THE CASE. 12. WE HAVE ALSO CAREFULLY GONE THROUGH THE JUDGMEN T OF THE APEX COURT IN THE CASE OF TOTGARS CO-OPERATIVE SALES SOCIETY LTD (SUPRA). THE APEX COURT, AFTER CONSIDERING THE PROVISIONS OF SECTION 80P FOUND THA T THE SOURCE OF INCOME IS RELEVANT FOR DECIDING THE APPLICABILITY OF SECTION 80P OF THE ACT. THE APEX COURT FURTHER FOUND THAT WEIGHTAGE SHOULD BE GIVEN TO THE WORDS THE WHOLE OF THE AMOUNT OF PROFIT AND GAIN OF BUSINESS ATTRIBUTABLE TO ONE OF THE ACTIVITIES SPECIFIED IN SECTION 80P(2)(A) OF THE ACT. THE APE X COURT FURTHER FOUND THAT THE WHOLE OF THE AMOUNT OF PROFIT AND GAIN OF BUSINESS EMPHASIZES THAT THE INCOME IN RESPECT OF WHICH DEDUCTION IS SOUGHT MUST CONSTI TUTE THE OPERATIONAL INCOME AND NOT THE OTHER INCOME WHICH ACCRUES TO THE SOCIE TY. THEREFORE, FOR THE PURPOSE OF CLAIMING DEDUCTION U/S 80P(2)(A)(I), THE INCOME SHOULD BE FROM OPERATIONAL ACTIVITY, VIZ. BANKING ACTIVITY. UNLESS AND UNTIL THE LETTING OUT OF PROPERTY FALLS WITHIN THE DEFINITION OF BANKING ACTI VITY, THE RENTAL INCOME RECEIVED BY THE TAXPAYER CANNOT BE CONSTRUED AS OPERATIONAL INCOME. THEREFORE, AS HELD BY THE APEX COURT, THE RENTAL INCOME RECEIVED BY TH E TAXPAYER ON LETTING OUT OF THE PROPERTY HAS TO BE ASSESSED AS INCOME FROM HOU SE PROPERTY AND IT CANNOT BE CONSTRUED AS INCOME FROM BANKING ACTIVITY. AT NO STRETCH OF IMAGINATION IT COULD BE SAID THAT RENTAL INCOME IS ATTRIBUTABLE TO BANKING BUSINESS. 13. A SIMILAR VIEW WAS TAKEN BY THE MADRAS HIGH COU RT IN THE CASE OF INDIAN OVERSEAS BANK LTD VS COMMISSIONER OF INCOME-TAX (2000 ) 246 ITR 2006 (MAD). THE MADRAS HIGH COURT, AFTER DISTINGUISHING THE JUD GMENT OF THE MADHYA PRADESH HIGH COURT IN NATIONAL NEWSPRINT PAPER MILLS LTD (1 978) 114 ITR 388 FOUND THAT THE BUSINESS OF THE TAXPAYER IS BANKING AND THE BUSI NESS CONNECTION BETWEEN THE 10 ITA NO.546/COCH/2010 TENANT AND TAXPAYER HAS NOTHING TO DO WITH BANKING O PERATION CARRIED ON BY THE TAXPAYER. FURTHER, THE KERALA HIGH COURT IN KOTTAYA M DISTRICT CO-OPERATIVE BANK LTD (1991) 188 ITR 568 (KER) HAS ALSO TAKEN A SIMILA R VIEW. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE TAXP AYER IS NOT ELIGIBLE FOR DEDUCTION U/S 80P(2)(A)(I) IN RESPECT OF RENTAL INC OME. BY RESPECTFULLY FOLLOWING THE JUDGMENT OF THE APEX COURT IN THE CASE OF TOTGA RS CO-OPERATIVE SALES SOCIETY LTD (SUPRA) AND THE KERALA HIGH COURT IN THE CASE OF KOTTAYAM CO-OPERATIVE LAND MORTGAGE LTD (SUPRA) WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME- TAX(A) AND RESTORE THAT OF THE ASSESSING OFFICER. 14. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 12 TH OCTOBER, 2012. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 12 TH OCTOBER, 2012 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH