COMMISSIONER OF INCOME-TAX VS ANGALORE DISTRICT COOPERATIVECENTRAL BANK LTD.
1999 P T D 1245
[233 I T R 282]
[Supreme Court of India]
Present: Mrs. Sujata V. Manohar and M. Srinivasan, JJ
COMMISSIONER OF INCOME-TAX
Versus
ANGALORE DISTRICT COOPERATIVECENTRAL BANK LTD.
Civil Appeals Nos. 1300, 1301 and 1302 of 1993, decided on 24/07/1998.
(Appeal from the judgment and order, dated January 9, 1991 of the Karnataka High Court).
Income-tax---
----Cooperative society---Special deduction---Cooperative society engaged in banking---Interest on Government securities and dividends on shares of Industrial Finance Corporation---Finding by Tribunal that interest income was attributable to assessee's business ---Assessee entitled to special deduction under S.80-P(2)(a)(i) in respect of such income---Indian Income Tax Act, 1961, S.80-P(2)(a)(i).
The assessee was a cooperative society engaged in banking business. For the assessment years 1977-78, 1978-79 and 1979-80, the assessee claimed deduction under section 80-P(2)(a)(i) of the Income Tax Act, 1961, on the income by way of interest on Government securities and dividends on shares of the Industrial Financial Corporation. The Income-tax Officer held that the investments were made out of reserves and disallowed the claim. The Tribunal accepted the contention of the assessee that interest income was attributable to the assessee's business income. The matter was remitted to the Income-tax Officer to determine the deduction available to the assessee under section 80-P(2)(a)(i). The High Court agreed with the Tribunal. On further appeal to the Supreme Court:
Held, affirming the decision, that there was no dispute that the assessee was a cooperative society carrying on the business of banking. The Tribunal had found in this case that the interest income was attributable to the business of the assessee. That finding had not been challenged on factual basis by the Revenue. No materials had been placed to upset the factual conclusion of the Tribunal. The assessee was entitled to the special deduction under section 80-P
Madhya Pradesh Cooperative Bank Ltd. v. C. T. (Addl.) (1996) 218 ITR 438 (SC) distinguished.
Bihar State Cooperative Bank Ltd. v. C.I.T. (1960) 39 ITR 114 (SC); Cambay Electric Supply Industrial Co. Ltd. v. C.I.T. (1978) 113 ITR 84 (SC) and Madhya Pradesh State Cooperative Bank Ltd. v. C.I.T. (Addl.) (1979) 119 ITR 327 (MP) ref.
K. N. Shukla, Senior Advocate (Hemant Sharma and N.D.B. Raju, Advocate for B.K. Prasad, Advocates with him) for Appellant.
G. Sarangan, Senior Advocate (Ms. Janaki Ramachandran, Advocate with him) for Respondent.
JUDGMENT
M. SRINIVASAN, J.---The respondent hereinafter referred to as the "assessee" is a cooperative society engaged in banking business. For the assessment years 1977-78, 1978-79 and 1979-80, the assessee claimed deduction under section 80-P(2)(i) of the Income Tax Act, 1961, on the income by way of interest on Government securities and dividends on shares of the Industrial Financial Corporation. The Income-tax Officer held that the investments were made out of reserves and disallowed the claim. On appeal, the Appellate Assistant Commissioner observed in his order that the reserve fund of the assessee was about Rs.33 lakhs and the circulating capital was about Rs.22 lakhs and held that the investment was out of the reserve fund. Consequently, he confirmed the order of the Income-tax Officer.
On further appeal, the Tribunal accepted the contention of the assessee that interest income was attributable to the assessee's business income. The Tribunal followed its earlier order in I.T.As. Nos.665 to 668 of 1981, dated July 30, 1982. Consequently, the appeal was allowed and the matter was remitted to the Income-tax Officer to determine the deduction available to the assessee under section 80-P(2)(a)(i). On a reference under section 256(2), the High Court of Karnataka agreed with the Tribunal and answered the question in favour of the assessee. The aggrieved Revenue has preferred this appeal.
Section 80-P(1) and (2)(a)(i) are in the following terms:
"80-P. (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee. Central Bank Ltd. (M. Srinivasan, J)
(2) The sums referred to in subsection (1) shall be the following, namely:---
(a) in the case of a cooperative society engaged in---
(i) carrying on the business of banking or providing credit facilities to its members, or--- .....
the whole of the amount of profits and gains of business attributable to any one or more of such activities."
There is no dispute that the assessee is a cooperative society carrying on the business of banking. If the income in question is attributable to the said activity, there is no doubt that the same is to be deducted from the gross total income. The Tribunal has found in this case that the interest income is attributable to the business of the assessee. That fin]ding has not been challenged on factual basis by the Revenue. No materials have been placed before us to upset the factual conclusion of the Tribunal.
Learned counsel for the appellant places reliance on the decision of this Court in Madhya Pradesh Cooperative Bank Ltd. v. C.I.T. (Addl.) (1996) 218 ITR 438, wherein the decision of the Madhya Pradesh High Court in Madhya Pradesh State Cooperative Bank Ltd. v. C.I.T. (Addl.) (1979) 119 ITR 327 was affirmed. The Bench held that circulating capital was that which was put into circulation or turned over to earn profits and Government securities coming out of the reserve fund which could not be easily encashed and which could be utilised only when contingencies arose, could not be considered to be circulating capital or stock-in-trade. It was therefore held that interest on Government securities placed with the State Bank of India and the Reserve Bank of India could not qualify for exemption under section 81 (now section 80-P) of the Income-tax Act. The decision was rendered on the facts of that case and it is not applicable in the present case in view of the finding of the Tribunal that the income in question is attributable to the business of the assessee.
Learned counsel for the assessee has invited our attention to sections 24 and 56 of the Banking Regulation Act, 1949, as well as section 57(2) of the Karnataka Cooperative Societies Act, 1959, and rule 23(3) of the Karnataka Cooperative Societies Rules, 1960, in support of his contention that the investments have been made by the assessee in compliance with the statutory provisions and in order to carry on the business of banking, the same was necessary and consequently such investments were part of the business activities falling within the scope of section 80-P(2)(a)(i).
He has also referred to the rulings in Bihar State Cooperative Bank Ltd. v. C.I.T. (1960) 39 ITR 114 (SC) and Cambay Electric Supply Industrial Co. Ltd. v. C.I.T. (1978) 113 ITR 84, in support of his contentions that the expression "attributable to" is of very wide import. It is unnecessary in this case to consider the same in detail.
On the fact situation of the case, we do not find any justification to interfere with the conclusion of the High Court. The appeals suffer dismissal. There will be no order as to costs.
M.B.A./1917/FC???????????????????????????????????????????????????????????????????? Appeal dismissed.