TMI Blog2016 (7) TMI 193X X X X Extracts X X X X X X X X Extracts X X X X ..... utory provisions to enable it to carry on banking business out of reserve fund by a cooperative society is exempt under section 80P(2) (a)(i) of the Act and placement of such funds being imperative for the purpose of carrying on banking business, income therefrom would be income from the assessee's business. In that view of the matter, the Revenue's objection to the deduction claimed by the assessee to its so called non-banking profits must rest here. The assessee had derived income from sale of Government securities and other approved investments. Such proceeds were thereafter invested in securities and deposits which may not have been approved under section 71 of the Gujarat Cooperative Societies Act. What we are concerned with is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,17,45,264/. The assessee filed revised return and thereby withdrew the claim of loss, however no such revised return was found and it was held by A.O. that no revised return was filed for withdrawing such claim. Therefore, the A.O. reopened the assessment under Sections 147/148 and ultimately in the final computation of income, the A.O. disallowed the exemption to short term / long term capital gains and restricted the deduction under Section 80P on profits relating to business of banking and thus worked out total income at ₹ 1,21,54,772/. 2.1 The action of the A.O. was taken before the CIT (Appeals) which had partly allowed in favour of the assessee. 2.2 The assessee, however has carried the matter before the ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of Surat District Cooperative Bank was not accepted by the Department and therefore denied deduction under section 80P of the Act in respect of what he referred to as non-banking profit. When the matter was carried before the CIT (Appeals), he took somewhat a different stand. CIT (Appeals) was of the opinion that certain proceeds on sale of securities were invested by the assessee with Madhavpura Mercantile Coop. Bank Ltd. which was doubtful investments. In any case, the same was not approved under section 71 of the Gujarat Cooperative Societies Act. He, therefore, found that nonutilization of sale proceeds would not fall within the normal banking business and the capital gain would not be eligible for deduction under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . However, subsequently, by virtue of the decision of the Apex Court in the case of C.I.T. v. Karnataka State Coop. Apex Bank, 251 ITR 194, the entire issue has been settled and decided in favour of the assessee. The Apex Court held and observed that there is nothing in the phraseology of section 80P(2)(a)(i) which makes it applicable only to income derived from working or circulating capital. It was further observed that from investment made, in compliance with statutory provisions to enable it to carry on banking business out of reserve fund by a cooperative society is exempt under section 80P(2) (a)(i) of the Act and placement of such funds being imperative for the purpose of carrying on banking business, income therefrom would be inco ..... X X X X Extracts X X X X X X X X Extracts X X X X
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