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2012 (10) TMI 618 - HC - Income TaxInterest income from the deposits of non SLR funds - disallowance of exemption under Section 80P (2) (a) (i) - assessee is a cooperative bank - Held that:- As decided in Bihar State Co-operative Bank Versus CIT [1960 (2) TMI 8 - SUPREME COURT] short-term deposits by the Bank was income from normal banking business and was, therefore, exempt from the liability to pay Income Tax, the money laid out in the form of short-term deposit did not cease to be a circulating capital and interest earned thereon, could not be other than income generated from the business of banking. The question as to whether the business is derived from or attributable to SLR or non-SLR funds would not make any difference for the purposes of qualifying the interest earned by the cooperative bank under Section 80P (2) (a) (i) as the deposits of surplus idle money available from working capital, including reserves, excess collection of interest tax and other incomes are all attributable to the business of banking. The interest from such deposits cannot be said to be beyond the legitimate business activities of the bank - in favour of assessee.
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