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2013 (10) TMI 463 - AT - Income TaxExemption u/s 80P - co-operative bank - interest income earned on investment out of SLR/Non SLR surplus funds - section 80P(2)(d) versus section 80P(2)(a). – Held that:- Reliance has been placed upon the judgment in the case of CIT vs. Andhra Pradesh State Co- operative Bank Ltd [2011 (6) TMI 215 - ANDHRA PRADESH HIGH COURT], wherein it has been held that All the income from banking business referred to under section 80P(2)(a)(i) of the Act would qualify for deduction under the Act - The income earned by the co-operative bank either by deposit of the prescribed percentage of its reserves or by deposit of their surplus funds is exempted. The income from either category of the deposits is certainly attributable to the business of banking. As long as the deposit of the surplus funds in other banks for the purpose of earning interest is not unauthorized or not barred by any of the applicable statutes, the income is certainly attributable to the business of banking. There is no concept of voluntary or non-statutory reserves. When the reserve fund of the society exceeds 25 per cent. of its working capital, the excess could be utilized in the business of the society with the sanction of the Registrar of Co- operative Societies If a co-operative bank derives income by lending money to its members, it being business of banking, is eligible for deduction. The statutory liquidity ratio, cash reserve or reserve fund required to be maintained by a scheduled bank or a co- operative bank under the provisions of the Reserve Bank of India Act, 1934, or the Banking Regulation Act, 1949, are all activities which are part of the business of banking. If section 80P(2)(a) of the Act is given a restrictive meaning as including the interest earned only on the statutory deposits made by a co-operative society, it would amount to supplying a casus omissus and has to be avoided by the court - Investment of funds by banks including the non-reserves is part of banking activities since no bank: would like its reserve funds to remain idle and not earn any interest. Therefore, the interest earned on such deposits is directly attributable to the business of banking and, therefore, exempt under section 80P(2)(a)(i) the Act – Decided against the Revenue.
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