Itxa/722/2011 Of The Commissioner Of Income Tax -1 Pune v. Jijamata Mahila Sahakari Bank Ltd

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.722 OF 2011 The Commissioner of Income Tax-I, Pune ..Appellant. V/s. Jijamata Mahila SahakariBank Ltd. ..Respondent. Mr. Vimal Gupta, senior Advocate with Ms. Padma Divakar for the appellant. None for the respondent. CORAM : J.P. DEVADHAR AND M.S. SANKLECHA, JJ. DATED : 17TH DECEMBER, 2012 P.C. :- 1.The questions of law that arises in this appeal read thus:- (I)Whether in the facts and in the circumstances of the case, the ITAT was correct in law to hold that income arising from sale of securities qualifies for deduction u/s.80P(2)(a)(i) of the I.T Act especially when such activity does not mention in the definition of 'banking' as per Banking Regulation Act ?ITAT was correct in law to hold that income arising from sale of securities qualifies for deduction u/s.80P(2)(a)(i) of the I.T Act especially when such activity does not mention in the definition of 'banking' as per Banking Regulation Act ? (ii)Whether in the facts and in the circumstances of the case, the ITAT failed to consider that only income arising from carrying on the business of banking qualifies for deduction u/s.80P of the I.T. Act and not such income which arises from enagement in other forms of business by a Co-operative Bank ? 2. The assessment year involved herein is AY 2004-05. 3.In the assessment year in question, the assessee had credited an amount of Rs.96,69.875/- to the profit and loss account being “profit on sale of Government securities”. The question is, whether the assessee is entitled for deduction under Section 80P(2)(a)(i) of the Income Tax Act, 1961 ('the Act' for short) in respect of the aforesaid income. The CIT(A) as also the ITAT have directed the assessing officer to verify whether the investment are made in Government securities in permissible mode of investment under the Banking Regulation Act, 1949 or Maharashtra State Co-op. Socieites Act, 1960 and Indian Trust Act, 1882 and if answer to the question is in the affirmative, then the income arising therefrom would be attributable to the business of banking and eligible for deduction under Section 80P(2)(a)(i) of the Act. According to the revenue, the activity of purchasing Government securities does not amount to banking activity. In the light of the judgment of the Apex Court in the case of CIT V/s. Nawanshahar Central Co-operative Bank Ltd. reported in [2007] 289 ITR6 (S.C.) andin the light of the judgment of this Court in the case of The Income Tax Commissioner-1 V/s. The Mahanagar Co-operative Bank Ltd. [Income Tax No.123 of 2010] decided on 28[th] July, 2011, in our opinion, the investments in Government securities would be a banking activity and if the investments are made as per the norms laid down under the Banking regulation Act, the assessee would be entitled to deduction under Section 80P(2)(a)(i) of the Act. In this view of the matter, we see no merit in the appeal and the same is hereby dismissed with no order as to costs. (M.S. SANKLECHA, J.) (J.P. DEVADHAR, J.)