TMI Blog2012 (11) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... y to its members. Therefore, letting out of the property is other than one specified in section and u/s 80P(2)(a)(i) and 80P(2)(c). Therefore, the rental income received by the taxpayer has to be assessed as "Income from house property" and it is not eligible for deduction u/s 80P(2)(a)(i) of the Act - in favour of revenue. - IT Appeal No. 546 (Coch.) of 2010 - - - Dated:- 12-10-2012 - N.R.S. Ganesan And B.R. Baskaran, JJ. Ms. Veni Raj for the Appellant. Devarajan for the Respondent. ORDER N.R.S. Ganesan, Judicial Member - This appeal of the revenuer is directed against the order of the Commissioner of Income-tax(A)-I, Trivandrum dated 14-07-2010 for the assessment year 2006-07. 2. The only issue arises for consideration is deduction u/s 80P(2)(a)(i) of the Act in respect of rental income received by the taxpayer. 3. Ms. Veni Raj, the ld. DR submitted that the taxpayer has received rental income of Rs.27,12,152 and claimed the same as deduction u/s 80P(2)(a)(i). Referring to the provisions of section u/s 80P(2)(a)(i) the ld. DR pointed out that the income of the taxpayer from banking activity or such other activity which is attributable to the banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duce of its members, or (vi) The collective disposal of the labour of its members, or (vii) Fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, The whole of the amount of profits and gains of business attributable to any one or more of such activities:" From the above provisions of sections 80P(1) and 80P(2) it is obvious that the income of the taxpayer from the business of banking or providing credit facility to its members and any activity which are attributable to business of banking are eligible for deduction u/s 80P(2)(a)(i). The question arises for consideration is whether letting out the property is attributable to the business of banking or not? 6. The business of banking is not defined in the Income-tax Act. Therefore, we have to necessarily go to the definition provided in Banking Regulation Act which defines "banking" as follows: "5(b) "banking" means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... managing and carrying out of any issue, public or private, of State, municipal or other loans or of shares, stock, debentures or debenture stock of any company, corporation or association and the lending of money for the purpose of any such issue; (e) Carrying on and transacting every kind of guarantee and indemnity business; (f) Managing, selling and realizing any property which may come into the possession of the company in satisfaction or part satisfaction of any of its claims; (g) Acquiring and holding and generally dealing with any property or any right, title or interest in any such property which may form the security or part of the security for any loans or advances or which may be connected with any such security; (h) Undertaking and executing trusts; (i) Undertaking the administration of estate as executor, trustee or otherwise; (j) Establishing and supporting or aiding in the establishment support of associations, institutions, funds, trusts, and conveniences calculated to benefit employees or ex-employees of the company or the dependents or connections of such persons; granting pensions and allowances and making payments towards insurance; subscr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Act. The Madras High Court has distinguished the judgment of the Kerala High Court. 9. We have also carefully gone through the judgment of the Karnataka High Court in the case of The Grain Merchants Co-operative Bank Ltd. (supra). The Karnataka High Court found that rental income received by a co-operative bank is income received in the course of business of banking and as such entitled for deduction u/s 80P(2)(a)(i) of the Act. 10. We have also carefully gone through the judgment of the Kerala High Court in Kottayan Co-operative Land Mortgage Bank Ltd. (supra). In the case before the High Court, the taxpayer co-operative society was engaged in the business of banking by providing credit facilities to its members. The taxpayer constructed a building to house the bank and the administrative office. The surplus space in that building was let out and the taxpayer claimed the rental income as deduction u/s 80P(2)(c) of the Act. The Kerala High Court, after considering the provisions of section 80P(2)(c) found that the business of banking or providing credit facility to its members falls under clause (c) of section 80P(2). The claim of exemption under clause (c) is in addition to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ully gone through the judgment of the Apex Court in the case of Totgar's Co-operative Sales Society Ltd (supra). The Apex Court, after considering the provisions of section 80P found that the source of income is relevant for deciding the applicability of section 80P of the Act. The Apex Court further found that weightage should be given to the words "the whole of the amount of profit and gain of business" attributable to one of the activities specified in section 80P(2)(a) of the Act. The Apex Court further found that "the whole of the amount of profit and gain of business" emphasizes that the income in respect of which deduction is sought must constitute the operational income and not the other income which accrues to the society. Therefore, for the purpose of claiming deduction u/s 80P(2)(a)(i), the income should be from operational activity, viz. banking activity. Unless and until the letting out of property falls within the definition of banking activity, the rental income received by the taxpayer cannot be construed as operational income. Therefore, as held by the apex court, the rental income received by the taxpayer on letting out of the property has to be assessed as "Incom ..... X X X X Extracts X X X X X X X X Extracts X X X X
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