ITO, Pune v. Mahesh Sahakari Bank Ltd., Pune

ITA 542/PUN/2010 | 2006-2007
Pronouncement Date: 28-10-2010 | Result: Dismissed

Appeal Details

RSA Number 54224514 RSA 2010
Assessee PAN AAAAM1838R
Bench Pune
Appeal Number ITA 542/PUN/2010
Duration Of Justice 6 month(s) 12 day(s)
Appellant ITO, Pune
Respondent Mahesh Sahakari Bank Ltd., Pune
Appeal Type Income Tax Appeal
Pronouncement Date 28-10-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-10-2010
Assessment Year 2006-2007
Appeal Filed On 15-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A PUNE BEFORE SHRI SHAILENDRAKUMAR YADAV AND SHRI D. KARUNAKARA RAO ITA NO. 542/PN/10 (ASST. YEAR 2006-07) ITO WARD 11(1) PUNE .... APPELLANT VS. MAHESH SAHAKARI BANK LTD. 372/73/74 MARKET YARD GULTEKDI PUNE PAN NO.AAAAM1838R . RESPONDENT APPELLANT BY : SHRI ABAY DAMLE RESPONDENT BY : SHRI SUNIL GANOO ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER O F THE CIT(A)-I PUNE DATED 03/11/2009. THE GROUNDS REVOLVE AROUND IS ALLOWA BILITY OF DEDUCTION OF PROFIT ON SALE OF GOVERNMENT SECURITIES U/S. 80P(2)(A) (I) OF THE INCOME TAX ACT. 2. DURING THE PROCEEDINGS BEFORE US IN LEMINE LD. COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE IS A CO-OPERATIVE BANK A ND EARNED PROFIT ON SALE OF GOVERNMENT SECURITIES. LD. COUNSEL ALSO MENTIONED THA T THE CIT(A) GAVE RELIEF IN FAVOUR OF THE ASSESSEE RELYING ON THE DECISION OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2005-06. IN THIS REGARD HE RELIED ON THE PARA 2.5 TO 2.7 OF THE IMPUGNED ORDER . ON THE OTHER HAND LD. DR FOR THE REVENUE RELIED ON THE ARGUMENTS MENTIONED IN THE GROUND AND ALSO ON THE ORDE R OF THE A.O. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE SAID PARAGRAPHS FOR THE SAKE OF COMPLETION OF THE ORDER SAID PARAGRAPHS ARE REPRO DUCED AS UNDER:- 2.5 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MAD E BY THE APPELLANT AND ALSO PERUSED THE MATERIAL PLACED ON RECORD AND CAS ES LAWS RELIED UPON. I FIND THAT THE ISSUE INVOLVED IS COVERED BY T HE DECISION HONBLE ITAT RAJKOT IN THE CASE OF RAJKOT NAGARIK SAHAKARI B ANK LTD. VS. ITO REPORTED IN 98 TTJ (RJT) 330 WHEREIN IT IS HELD AS UND ER: ITA NO. 542/PN/10 A.Y 2006-07 PAGE 2 OF 3 7.AS PER PROVISIONS OF S. 6(1)(A) OF THE BANKING REGULATION ACT DEALING IN STOCKS FUNDS SHARES DEBENTURES BONDS SECURITIES AND INVESTMENT OF ALL KINDS PURCHASING AND SELLING OF BONDS SCRIPS AND OTHER FORMS OF SECURITIES COME UNDER THE PURVIEW OF ORDINARY BANKING BUSINESS OF A BAN K. ANY INCOME DERIVED OUT OF SUCH BANKING OPERATION IS DEDUCTIBLE UNDER S. 80P(2)(A)(I) OF IT ACT 1961. HONBLE SUPREME COURT IN THE CASE OF MEHSANA DIS TRICT CENTRAL CO- OPERATIVE BANK VS. INCOME TAX OFFICER (SUPRA) HAS CLEA RLY REFERRED TO S. 6(1)(A) OF BANKING REGULATION ACT WHILST GRANTING DEDUCTION UNDER S. 80P TO INCOME RELATED TO THE LOCKER RENT AS THE LOCKER RENT IS ALSO EA RNED BY THE NORMAL COURSE OF BANKING BUSINESS. AS PER PROVISIONS OF S. 6(1)(A) OF THE BANKING REGULATION ACT DEALING IN SECURITIES AND THE RESULTANT PROFIT EARNE D THEREFORE ARE ALSO INCOME EARNED IN THE NORMAL COURSE OF BANKING BUSINESS. BY IMPLICATION ALL FORMS OF ACTIVITIES FALLING WITHIN THE AMBIT OF S. 6(1)(A) OF THE BANKING REGULATIONS ACT WOULD CONSTITUTE BANKING BUSINESS AND THE INCOME EMANATIN G THEREFORE WOULD BE ATTRIBUTABLE TO BUSINESS OF BANKING AND CONSEQUENTLY ELIG IBLE FOR DEDUCTION UNDER S. 80P(2)(A)(I). INVESTMENTS IN GOVERNMENT SECURITIES DEPOSITS ARE SPECIFIED ACTIVITIES REGARDED AS PART OF THE ORDINARY BUSINESS ACTIVITIE S OF A BANK IN VIE OF THE CLEAR LANGUAGE USED IN S. 6(1)(A) OF THE BANKING RE GULATION ACT. AS PER THE FISCAL GUIDELINES LAID DOWN BY THE RBI BANKS ARE STATUTOR ILY REQUIRED TO INVEST IN THE STATUTORY LIQUIDITY RATIO (SLR) SECURITIES. SLR SECU RITIES ARE APPROVED SECURITIES ISSUED BY THE CENTRAL STATE OR OTHER GOVER NMENT CONTROLLED ORGANIZATIONS BANKS CAN ALSO INVEST IN NON-SLR SE CURITIES IF THEY HAVE SURPLUS FUNDS. THERE IS A MARKET PREVAILING FOR NON-SLR SECURITIES ALSO. NON-SLR SECURITIES ARE USUALLY BONDS ISSUED BY GOVERNMENT ORGANIZ ATIONS LOCAL BODIES ETC. THERE IS NO DISPUTE TO THE FACT THAT BANKS ARE A LLOWED TO INVEST ONLY IN SECURITIES WHICH ARE APPROVED BY THE RBI FROM TIME-TO- TIME. THESE ARE ESSENTIALLY GOVERNMENT OF INDIA SECURITIES AND/OR BONDS IS SUED BY GOVERNMENT INSTITUTIONS. BANKS ARE NOT PERMITTED TO INVEST IN ANYTH ING OTHER THAN THESE APPROVAL SECURITIES. . 13. IN VIEW OF THE ABOVE DISCUSSION WE ARE PERSUADED TO AGREE WITH THE LEARNED AUTHORIZED REPRESENTATIVE THAT THE ACTIVITIES OF DEALING IN GOVERNMENT SECURITIES FELL WITHIN THE AMBIT OF S. 6 (1)(A) OF THE BANKING REGULATION ACT AND CONSTITUTE BANKING BUSINESS AND THE INCOME EMANATING THEREFORE WOULD BE ATTRIBUTABLE TO BUSINE SS OF BANKING AND THEREFORE ELIGIBLE FOR DEDUCTION UNDER S. 80P(2)( A)(I) IN THE HANDS OF ASSESSEE CO-OPERATIVE BANK. WE ARE THEREFORE INCLINED TO REVERSE THE FINDINGS OF THE LOWER AUTHORITIES AND DIRECT THE ASSESSIN G OFFICER TO ALLOW DEDUCTION UNDER S. 80P(2)(A)(I) IN RESPECT OF PROFIT EA RNED BY THE CO-OPERATIVE BANK FROM THE IMPUGNED GOVERNMENT SECURITIES. 2.6 THE HONBLE PUNE ITAT IN APPELLANTS OWN CASE FOR THE A.Y 2005-06 IN ITA NO. 1088/PN/08 FOLLOWED THE ABOVE DECISION A ND ALLOWED THE APPEAL OF THE APPELLANT CLAIMING DEDUCTION U/S. 80P (2)(A)(I) IN RESPECT OF PROFIT ON SALE OF GOVERNMENT SECURITIES. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT PROFIT WAS EARNED BY THE APPELLANT ON SA LE OF GOVT. SECURITIES WHICH IS ONE OF THE PERMISSIBLE MODES OF INVESTMENT AS PER GUIDELINES ON INVESTMENTS IN NON-SLR DEBT SECURITIES ISSUED BY RBI IN CIRCULAR DATED NOVEMBER 17 2003. IN FACT AS PER THE DETAILS OF SECU RITIES FILED BY THE APPELLANT THE SECURITIES TRADED BY THE APPELLANT DURI NG THE YEAR WHICH RESULTED IN PROFIT IN QUESTION WERE APPROVED SECURITIES AND PERMISSIBLE MODES OF INVESTMENT. THE DEDUCTION WAS DENIED BY TH E ASSESSING OFFICER ON THE SOLE GROUND THAT ALL THE ALLIED ACTIVITIES SP ECIFIED IN SEC. 6(1)(A) OF THE BANKING REGULATION ACT CANNOT BE CONSTRUED AS CO RE ACTIVITY OF BANKING AND THE DECISION OF APEX COURT IN MEHSANA S CASE CANNOT BE UNIVERSALLY APPLIED TO ALL SUCH ALLIED ACTIVITIES. B UT THE HONBLE SUPREME COURT IN THE CASE OF MEHSANA DISTRICT CENTRAL CO-OPERAT IVE BANK (SUPRA) ITA NO. 542/PN/10 A.Y 2006-07 PAGE 3 OF 3 HAS REFERRED TO S. 6(1)(A) OF BANKING REGULATION ACT WHILE GRANTING DEDUCTION UNDER S. 80P IN RESPECT OF INCOME RELATED TO THE LOCKER RENT AS THE LOCKER RENT IS ALSO EARNED BY THE BANK IN THE NORMA L COURSE OF BANKING BUSINESS. AS PER SEC. 6(1)(A) OF THE BANKING REGULAT ION ACT WHICH FINDS ITS PLACE IN PART II UNDER THE HEADING BUSINESS OF B ANKING COMPANIES DEALING IN SECURITIES IS ONE OF THE FORMS OF BUSINES S THAT A BANKING COMPANY MAY ENGAGE IN ADDITION TO THE CORE BANKING BUSINESS. THUS BY IMPLICATION DEALING IN GOVT. SECURITIES WHICH FALLS WITHIN THE AMBIT OF S. 6(1)(A) OF THE BANKING REGULATION ACT WOULD CONSTIT UTE BANKING BUSINESS AND THE INCOME ARISING THEE FROM WOULD BE ATTRIBUTABLE TO BUSINESS OF BANKING AND THEREFORE ELIGIBLE FOR DEDUCTION UNDER S. 8 0P(2)(A)(I). A SIMILAR VIEW WAS TAKEN BY THE ITAT (SMC) PUNE IN THE CASE IF THE PIMPALGAON MERCHANTS CO-OPERATIVE BANK LTD. IN ITA N O. 254/PN/05 I.E. A.Y 2003-04 DATED 6.10.2006. 2.7 RESPECTFULLY FOLLOWING THE DECISION OF ITAT PU NE IN APPELLANTS OWN CASE FOR THE ASSESSMENT YEAR 2005-0 6 THE DISALLOWANCE OF DEDUCTION OF RS. 26 61 027/- CLAIM ED BY THE APPELLANT U/S. 80P(2)(A)(I) IN RESPECT OF PROFIT ON SALE OF GOVT. SECURITIES IS HEREBY DELETED. GROUND NO. 1 OF APPE AL SUCCEEDS. 4. FROM THE ABOVE IT IS CLEAR THAT THE PROFIT DERIVED ON SALE OF GOVERNMENT SECURITIES IS DEDUCTIBLE U/S. 80P(2)(A)(I) OF THE IN COME TAX ACT AS HELD IN THE ASSESSEES OWN CASE AND IN THE CASES OF OTHER TOO. I N THESE CIRCUMSTANCES WE ARE OF THE OPINION THAT THE ORDER OF THE CIT(A) DOES N OT CALL FOR ANY INTERFERENCE. ACCORDINGLY THE GROUNDS OF THE REVENUES APPEAL ARE DISMISSED . 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH OCTOBER 2010. SD/- SD/- (SHAILENDRAKUMAR YADAV) (D.KARUNAKAR A RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 28 TH OCTOBER 2010 R COPY OF THE ORDER IS FORWARDED TO : 1. ITO WARD 11(1) PUNE 2. ASSESSEE 3. CIT(A)-I PUNE 4. CIT- PUNE 5. DR ITAT A BENCH PUNE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE