TMI Blog2008 (2) TMI 498X X X X Extracts X X X X X X X X Extracts X X X X ..... ) The learned CIT(A) failed to appreciate that (a) The investment of funds in Patsanstha was not in violation of the provisions of section 11(5) and section 13(1)(d) (b) The Patsanstha was a co-operative society engaged in the business of banking and thus, the investments were in accordance with the provisions of section 11(5) and hence, there was no violation of section 13(1)(d). The short issue we are thus required to adjudicate is whether or not the deposits made by the assessee with Dr. Dada Gujar Co-operative Patsanstha Ltd. were covered by section 11(5)(iii) of the Income-tax Act, or not. It is so for the reason that in case we are to hold that these deposits were indeed covered by the provisions of section 11(5)(iii), as learned representative agreed, it will follow that the provisions of section 13(1)(d) were indeed complied with. 3. We may take note of some brief facts of the case. The assessee is a charitable trust registered under section 12A of the Income-tax Act, 1961. The assessee runs educational institutions, hostels, hospitals at various places in Pune. In the course of proceedings before the Assessing Officer, it was noticed that the assessee had made in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the business of banking should be something similar to the scheduled bank if not exactly the same . He also added that co-operative bank operated by co-operative society fits in the proper groove as it is something similar to the scheduled bank, but the same logic cannot be applied for Patsanstha . In the opinion of the CIT(A) a Patsanstha can at best be a credit society created for the benefit of its members, but taking and giving credit does not mean that the same is conducting banking business . The CIT(A) observed that the expression business of banking is not defined in the Income-tax Act and, therefore, it would be appropriate to fall back on the Banking Regulation Act to examine whether or not the Patsanstha i.e., credit society is not doing banking business. A reference was then made to the provisions of section 80P(2)(a)(i) of the Act in support of the contention that carrying on the business of banking and providing credit facilities to its members are two different expressions with different connotations. The CIT(A) thus held that investment in Patsanstha (credit society) cannot be covered by the scope of section 11(5)(iii) of the Act and, therefore, the Assessi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, it cannot be taken as a credit institution on which the provisions of Interest-tax Act apply. Their lordships, on these facts noted that it is true that with respect to cooperative societies, the provisions of Banking Regulation Act, 1949. have not been made applicable and they are not banks but their Lordships added that the second limb of the section (i.e., co-operative society engaged in the business of banking) has to be given its meaning which would definitely mean that a co-operative society engaged in carrying on the business of banking falls within the definition of a credit institution. Their Lordships added that the terms contained in the definition section with respect to cooperative society has to be given full contextual meaning and it has got special significance and meaning. Their Lordships then emphatically stated that a co-operative which undertakes the business of banking such as lending money to its members or accepting deposits or raising loans from financial or banking institutions and advancing the same to its members, is definitely engaged in the business of banking . In our considered view although these observations were made in the context of I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a credit society dealing with members only can be said to be in the business of banking. These two expressions are two distinct limbs of the definition and must be given meaning accordingly. The common thread, if at all be necessary, between the two expressions is the business of banking, which, in the esteemed opinion of the Hon ble Madras High Court, includes business of giving loans to members only. Learned CIT(A) should have yielded to the higher wisdom of the higher tiers in the judicial system. 7. The learned Departmental Representative has also urged us to consider the intent of the legislature by taking into account a fact that it is only when public funds of the institutions, eligible to exemption under section 11, are invested and deposited with the Government institutions or scheduled banks or such other safe investment places that the tax exemption is available, it is submitted that these credit societies are managed by few individuals and are not actually meant for public good, the management is unfettered by the adequate supervisory control of the governmental machinery such as applicable for scheduled banks etc. The parking of funds in such credit co operative soc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ould iron out the creases . 8. The Co-ordinate Bench then disposed of the said plea by observing as follows : 9. As for the Lord Denning s observations in the Seaford Court Estates Ltd., which have been heavily relied upon by the learned counsel, we wish to make some observations. The House of Lords itself, in a later judgment in the matter of Magor St. Mellons Rural District v. Newport Corpn. [1951] 2 All. ER 839, did not approve the proposition advanced by Lord Denning. It is interesting to note the articulate expressions of Lord Simonds, supporting the majority view and at page 841 of All. ER Vol. 2 (1951), unequivocally and categorically rejecting Lord Denning s theory on the relevance of intent of Legislature : My Lords, the criticism which I venture to make of the judgment of learned Lord Justice (Denning L.J.) is not directed at the conclusion he has reached. It is after all a trite saying that on questions of construction different minds may come to different conclusions. But it is on the approach of Lord Justice to which is a question of construction and nothing else. I think it desirable to make some comment, for, at a time when so large a proportion of the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntitled to read words into an Act of Parliament unless clear reasons for it is to be found within the four corners of the Act itself. Vickers Sons Maxim Ltd. v. Evans [1910] AC 444 (HL), at p. 445. Lord Simonds rejection of Denning s approach was cited, with approval, by Hon ble Supreme Court in the case of Punjab Land Development Corpn. v. Presiding Officer 1990 (3) SCR 111, at pp. 153-54.... 9. We agree with, the views, so stated by the Co-ordinate Bench. We thus decline to be drawn into the controversy about the intent of legislature which is not any way expressly set out anywhere. When plain words support the case of the assessee, we cannot decline him the relief on the ground that the relief, if given, will be contrary to the legislative intendment as perceived by the learned Departmental Representative. 10. As we part with the matter, we may mention that one of the pleas taken by learned counsel for the assessee was that as soon as the assessee learned about controversy on application of section 11(5)(iii) on the deposits with Patsanstha (credit Co-operative society), the assessee withdrew the monies from the same and deposited the monies with the institutions on wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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