TMI Blog1991 (1) TMI 242X X X X Extracts X X X X X X X X Extracts X X X X ..... erving as follows : "Rent received is shown as income from house property. In the balance sheet the said building is shown as an asset under the head "Building". Depreciation is claimed in the accounts. The rental income is considered as income other than banking business. In view of these facts it appears that the appellant is treating the said building as an investment not connected with co-operative activities. It may be mentioned that the building was acquired in 1976 and sold in 1982 after a gap of six years. No circumstances are indicated to show that the sale was to liquidate the assets of co-operative banking activities. It is therefore held that the building was not an asset of co-operative banking activities. The income from sale of the said building would therefore not constitute the income from banking activities." It can be seen that the AAC has not dealt with the question of exemption under section 80P(2)(c)(ii). Before the Tribunal the following grounds have been taken : (1) The AAC effed in treating Rs. 3,218, income from locker rent as taxable income [though it is co-op income (exempt) from banking business]. (2) The AAC effed in treating Rs. 96,158 as capi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the income of these properties was being used in that business or that those properties were subsequently treated as stock-in-trade of that business except perhaps in the case of banking institutions." (Emphasis supplied) On the basis of this he submitted that in the case of a Bank the property so acquired would be stock-in-trade. He pointed out that this proposition has been again relied upon in the case of Coimbatore Anupparpalayam Bank Ltd. v. CIT [1961] 42 ITR 576 (Mad.) at page 587. He also pointed out that in the case of Bareilly Corpn. Bank Ltd. v. CIT (No. 2) [1952] 22 ITR 528 the Allahabad High Court was concerned with a similar case and it had held that the purchase of the immovable property and the subsequent sale thereof was a transaction entered into by the bank in the course of money-lending business. 6. His next submission was that even if the acquisition of immovable property was an investment the income therefrom was income from banking relying upon the following authorities : Bihar State Co-op Bank Ltd. v. CIT [1960] 39 ITR 114 (SC) CIT v. Bombay State Co-operative Bank Ltd. [1968] 70 ITR 86 (SC) U.P. Co-op Bank Ltd. v. CIT [ 1966] 61 ITR 563 (All.) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... siness of banking a banking company may engage in any one or more of the following forms of business, namely :-- in clauses (a) to (o) of that sub-section various activities have been mentioned. He submitted that the definition in section 5(b) of that Act was of banking and the other activities of a bank were mentioned in the sub-section 6 because thereby the bank was enabled to carry on the activities in addition to banking. He submitted the decision of the Madhya Pradesh High Court dealt with this problem in the case of Bhopal Co-operative Central Bank v. CIT [1988] 169 ITR 573. The Court while conceding that the expression "attributable to" in the said section was wider than the expression "derived from" had observed that apparently any income which may be derived in connection with any of the activities which fell within the definition of the term 'banking' in the Banking Regulation Act would be treated as income attributable to banking. It held that income from locker rent did not appear to be co-related to any of the activities mentioned in the said definition. The learned departmental representative submitted that the lending activity of the bank ended by lending the amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a general proposition but capital gains was included in banking activity which was mentioned in section 80P. He then submitted that the decision of the Supreme Court in the case of Express Newspapers Ltd. and United Commercial Bank Ltd. were both explained by its later decision in the case of Cocanada Radhaswami Bank Ltd. Referring to the learned departmental representative's argument on section 6(f) of the Banking Regulation Act he submitted that acquisition of property was part of banking activity because it was consequence of the lending. He submitted that the observations of Madhya Pradesh High Court in the case of Bhopal Co-operative Central Bank which have been summarised above were in his favour because there it was mentioned that the expression "attributable to" was wider than the expression "derived from" and that therefore the sale of the property and the consequent capital gain was part of the banking activity. Further he submitted that by readily realisable securities the immovable property could not be excluded because it was possible to mortgage or sell that property and obtain liquid funds. Regarding the learned departmental representative's argument that in this cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to which mentions profit and gain of business attributable to the business of banking and to decide whether the income of the assessee would be included in this expression. The Madhya Pradesh High Court in the case of Bhopal Co-op. Central Bank Ltd. has stated that the expression "attributable to" is wider than the expression "derived from" but in doing so it was following the Supreme Court decision in the case of Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84. In that case the Supreme Court was concerned with the question whether profits worked out as per section 41(2) on the sale of certain machinery by the assessee-company could be said to be profit and gain attributable to the business of generation or distribution of electricity. It observed "...profits and gains attributable to the business of the specified industries (here generation and distribution of electricity) forms a component of the total income... it is obvious that in computing the total income of the concerned assessee. . . the balancing charge arising as a result of sale of old machinery and building and worked out as per section 41(2) irrespective of its real character will have to be taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce used in money-lending business did not automatically make that property part of the business. This is not clear enough in the observation to state positively that in the case of banking institution all forms of property acquired from a source used for money-lending business is a part of that business. The Court has clearly used the words except, perh aps. We are next to consider the decision of the Madras High Court in the case of Coimbatore Anupparpalayam Bank Ltd. In that case the bank had purchased properties belonging to its debtors in execution of decrees. Thereafter it sold the properties and the Court held as follows : "that the properties at the time they were purchased represented the converted form of the stock-in-trade of the banking business of the assessee, viz., money, and, therefore, unless there was clear and irrefutable evidence that the assessee intended to take the equivalent of their value out of its money-lending business, the profit made by the resale of the properties must necessarily be regarded as profits of the money-lending business. And as there was no indication whatever to show that the assessee ever sought to treat the acquisition of these proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt case the money has been invested in immovable property which in our view is not a readily realisable security. The learned counsel stated that it is such security on the ground that it can be mortgaged but we are unable to accept it. Any immovable property is not like a gold or silver bar or government security which can be readily sold in the market. Even mortgaging and obtaining money thereon would take time. In the present case the bank has acquired immovable property. It may be true that this acquisition was incidental to realisation of its dues but the bank could have got the property sold and realised its dues instead of acquiring it and keeping it for a long time and selling it thereafter. It may be beneficial to the bank's business to acquire and sell the property and no one prevents the bank from doing so. But the question is whether acquiring the immovable property and selling it at a profit is banking business the profit of which would be exempt under section 80P. To this we must give the answer no. 14. It is true in the case of Cocanada Radhaswami Bank Ltd. the Supreme Court explained its earlier decision in the case of Express Newspapers Ltd. but it did so by stat ..... 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