TMI Blog2012 (8) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal by the Revenue, arising out of the Order by the Commissioner of Income-tax (Appeals), Ajmer ('CIT(A)' for short) dated 01-07-2011, partly allowing assessee's appeal contesting its assessment u/s. 143(3) of the Income Tax Act, 1961 ('Act' for short) dated 14-08-2006, and the assessment year (A.Y.) under reference is 2004-05. 2. The brief facts of the case are that the assessee is a Regional Rural Bank ('RRB' for short), with its principal constituents being the Government of India, Bank of Baroda and Government of Rajasthan, their respective share holding company at 50%, 35% and 15%. It returned its income for the year at nil, setting off the entire income of Rs. 214.91 lacs against brought forward business losses for the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng that the hon'ble apex court has since clarified that deduction u/s. 80P is available only against the operational income of the assessee. In that case, the assessee was a cooperative society, carrying on the business of providing credit facilities to its members, as also marketing the agricultural produce of its members. The question of deductibility u/s. 80P(2)(a)(i) of the interest income on short term deposits on the investments out of surplus funds with the assessee in computing its taxable income arose. The apex court held that deduction u/s. 80P was available only on the operational income of the assessee-society. The income under reference could not be said to be attributable to the activities of the society, namely; carrying on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1976 ('RRB Act' for short) provides that every RRB shall carry on or transact the business of banking, as defined in clause (b) of sec. 5 of the Banking Regulation Act, 1949 ('BRA Act' for short), and engage in one or more forms of business as specified in sub-section (1) of section 6 of that Act. Their relevant extracts, viz. Section 18(1) of the RRB Act; sections 5(b) and 6 of the BRA Act, were adverted to (copy on record). Circular No. 319 dated 11-01-1982 by CBDT clarifies that the RRBs were, by virtue of section 22 of the RRB Act, deemed to be a cooperative society and, accordingly, section 80P is applicable to RRBs. However, on the Bench drawing his attention to the fact of the absence of any gross total income; both the assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ock, bonds, obligations, securities and investments of all kinds. Now, if investment of the deposits accepted from the public, or on its own, forms part of the banking business, it does not take much strain to see and thus to hold that selling or realizing those investments is also an integral part thereof. In fact, section 6(1)(a) specifically includes 'dealing in, inter alia , securities and investments of all kinds', and which would only imply, acquiring, holding, purchasing or selling or dealing in any other manner. This is even considering, and which may not perhaps be incorrect to say, that investment under reference forms part of the capital or reserve funds of the assessee. Surplus on the sale of investment would yet only be assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Co-operative Banks, to which also the provisions of the Banking Regulation Act are applicable. We, therefore, are of the clear view that impugned investment income is eligible for deduction u/s. 80P(2)(a)(i) of the Act, and hold accordingly, confirming the impugned order in its respect. The other incomes, aggregating to Rs. 26,000/-, under reference are too nominal to warrant any comment and, in any case, are only to be considered as receipts incidental to its banking business by the assessee-bank. We hold accordingly, approving the claim for deduction u/s. 80P thereon. 4.3 So however, as afore-stated, no claim for deduction u/s. 80P would be exigible in the admitted facts of the instant case, much less on the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1997-98, without giving a finding as to the losses for AY 1994-95, as claimed by the assessee. The AO, while giving effect to this order, is therefore directed to verify this aspect of the matter as well. Also, we may clarify that our observations and findings are limited to the legal aspects of the matter, we being obliged to facilitate the determination of the correct taxable income, and do not impinge on any of the relevant figures per se , for correction in which, where incorrect, the parties are at liberty to adopt the course as permissible in law Kapurchand Shrimal v. CIT [1981] 131 ITR 451/7 Taxman 6 (SC). 4.4 In view of forgoing, though in agreement with the ld. CIT(A) that the impugned incomes, aggregating to Rs. 62.26 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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