TMI Blog1998 (8) TMI 129X X X X Extracts X X X X X X X X Extracts X X X X ..... d by limitation by 8 days. The Registry had brought this fact to the notice of the assessee, in response to which the assessee submitted vide petition dated 25-7-1994 that the assessee had sent the cross-objections by post under postal certificate on 24-6-1994 and, therefore, the same should have been received well before 4-7-1994, which was the due date. Due to postal delay, the cross-objections were received by the Registry on 12-7-1994. It was requested that the delay caused in postal transit from Vidisha to Indore was beyond the control of the assessee and, therefore, the delay may be condoned. The assessee had enclosed photocopy of the postal certificate in support of the contention that the cross objections had been sent under postal certificate on 21-6-1994. 4. After hearing the ld. representatives of the parties and having regard to the fact that the delay in filing the cross-objections was on account of delay attributable to the postal authorities, we hereby condone the delay, and admit the cross-objections. 5. The facts relating to the revenue's appeals are that the assessee is a cooperative bank. It had filed its returns declaring 'nil' income on 4-8-1989, 12-11-1990 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s or reserve fund of the assessee. Reliance was placed on the decision in Bhopal Co-operative Central Bank Ltd.'s case. The submissions of the assessee found favour with the CIT (Appeals), who was of the view that it has been held in Bhopal Co-operative Central Bank Ltd.'s case that the security deposit made by the co-operative society in compliance with section 24 of the Banking Regulation Act, 1949 is part of its stock-in-trade and the interest received on such deposits is income arising from business of banking and such income is exempt from tax under section 80P(2)(a)(i). He further observed that since the deposits made by the assessee-bank in the securities are less than the limits provided under section 24 of the Banking Regulation Act, 1949, the income from these securities cannot be brought to tax. He accordingly deleted the impugned additions in all the three years. The revenue is dissatisfied and is before us. 7. Shri Brijesh Gupta, the ld. D.R., submitted that the CIT(Appeals) was not justified in deleting the impugned additions in view of the law enunciated in the following decisions: Madhya Pradesh Co-operative Bank Ltd. v. Addl. CIT[1996] 218 ITR 438/ 84 Taxman 640 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive society primarily engaged in the banking business. The assessee filed returns claiming exemption under section 80P of the Act. A question arose whether the income from interest on securities earmarked to reserve fund was entitled to exemption under section 80P. Following the decision of the Hon'ble Supreme Court in Madhya Pradesh Co-operative Bank Ltd.'s case, the jurisdictional High Court held that income from interest on securities earmarked to reserve fund was not entitled to special deduction under section 80P. 10. In Rajasthan State Co-operative Bank's case, a question before Rajasthan High Court arose whether the Tribunal was justified in holding that the income of Rs. 35,69,868 from investment of reserve funds is exempt under section 80P of the Act. Their Lordships of Rajasthan High Court noted that the provisions of Rules 55 and 56 of the Rajasthan Cooperative Bank Rules, 1966 can be compared with the Madhya Pradesh Govt. instructions dated October 7, 1960, which was considered by the Apex Court in the case of Madhya Pradesh Co-operative Bank Ltd. and on the basis of which it was considered that investment of reserve fund and securities is not to meet the probable ev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging to tax the income earned on securities. Shri Jain submitted that the said note was appended by way of abundant precautions so that additional tax may not be levied. However, it was an alternate plea with protest. On merits, Shri Jain submitted that the view of the CIT (Appeals) finds support from the latest decision of the Hon'ble Supreme Court in CIT v. Bangalore District Co-operative Central Bank Ltd. [1998] 99 Taxman 404, wherein their lordships have considered their earlier decision in Madhya Pradesh Co-op. Bank Ltd.'s case, (wherein the decision of M.P. High Court in Madhya Pradesh State Co-operative Bank Ltd.'s case was affirmed.) Their lordships observed that the decision in Madhya Pradesh Co-operative Bank Ltd.'s case was rendered on the facts of that case and it is not applicable to the case before them in view of the finding of the Tribunal that the income is attributable to the business of the assessee. 14. In his counter arguments, Shri Brijesh Gupta, the ld. D.R., submitted that while issuing the intimation under section 143(1)(a), the Assessing Officer had not applied his mind on the issue of taxability of the interest earned on investment of reserve fund. He s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the returned income or loss for the purpose of computing the tax or interest payable or refundable to the assessee. 17. It appears that in the case of the assessee, no prima facie adjustments were made and hence the question of issuing intimation did not arise. It is apparent that at the time of processing the above returns, the Assessing Officer had not considered the legal position about the taxability of interest on securities held by the assessee co-operative bank as enuciated by the jurisdictional High Court in M.P. State Co-operative Bank Ltd.'s case and Madhya Pradesh Rajya Sahakari Bank's case Subsequently, he considered the above legal position. This, in our opinion, would not amount to change of opinion. Change of opinion pre-supposes that there was, earlier, a formation of an opinion. When no such opinion was formed by the Assessing Officer at the time of processing the original returns, it will be difficult to assume that a change in that opinion was being effected. In the case of A.L.A. Firm v. CIT [1991] 189 ITR 285/55 Taxman 497, their Lordships of the Supreme Court have held that where the Assessing Officer did not consider the decision of the jurisdictional High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the circulating capital/stock-in-trade of the assessee and that they were necessary for meeting the statutory compliance of the Banking Regulation Act, failing which, the assessee could not lawfully carry on and preserve the continuance of its banking business. 20. We may observe that the revenue could not refute the above contentions either before the CIT (Appeals) or before us. In the absence of any material brought on record by the revenue to controvert the above contentions, it is not permissible to ignore them and draw adverse inference. On the facts available on records, it has, therefore, to be held that the assessee co-operative society, which is carrying on the business of banking, earned interest income on its investment in securities as per the provisions of the Banking Regulation Act in the course of carrying on its banking business. If that be so, the latest decision of the Hon'ble Apex Court in Bangalore District Co-operative Central Bank Ltd.'s case would squarely apply to the facts of the assessee's case, wherein their Lordships took notice of the fact that the investment in securities had been made by the assessee in compliance with the statutory provisions o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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