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2016 (10) TMI 86 - ITAT AHMEDABAD

2016 (10) TMI 86 - ITAT AHMEDABAD - TM - Section 80P deduction inter alia on DEMAT charges, special adhesive stamps and interest income derived from loans given to employees - Held that:- A perusal of the section 6(1) of the Banking Regulation Act makes it clear that these demat charges are for maintaining dematerialised form of assessee’s investments made in securities at its customers’ behest. Learned Departmental Representative seeks to cover the same in the “constituents” category hereinabov .....

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stion. - Income on account of special adhesive stamp franking charges as derived @ 1% commission thereupon the paper book contains franking machine authorisation as issued by the Chief Controlling Revenue authorities, Gujarat State, Gandhi Nagar. We notice that this amounts to conferring the assessing authority of an agent of State Government as provided under section 6(1)(b) of the Banking Regulations Act hereinabove. We accept assessee’s arguments by quoting Hon’ble apex Court’s decision h .....

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members. We have perused section 25 of the Gujarat State Co-operative Society’s Act 1961 prescribing such nominal members. There is nothing in section 80P of the Act to the contrary so as to decline the impugned deduction. We reiterate that it is a deduction provision to be liberally construed. We conclude in these facts that the assessee has derived the impugned interest income by advancing loans to its nominal members who are also working as its employees. - Our view is that the latter sta .....

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year 2006-07, arises from order of the CIT(A)-VI, Ahmedabad dated 28.03.2011, passed in case No.CIT(A)- VI/ITO.Wd.7(2)/18/08-09, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee raises following substantive grounds:- (1) The learned Commissioner of Income Tax (Appeals) VI, Ahmedabad has erred both in law and on facts of the case in framing appellate order u/s.250 of the I.T. Act for A.Y. 2006-07 on 28th day of March, 2011 (2) The Learned CIT(A) .....

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2006 declaring nil income. It claimed section 80P deduction inter alia on DEMAT charges, special adhesive stamps and interest income derived from loans given to employees. The Assessing Officer rejected the same in all the issues in his order dated 30.12.2008 inter alia holding that demat and special adhesive stamp collection charges did not form part of the banking business. He concluded on the third issue of interest on loans given to employees that the same was not allowable under section 80P .....

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oan given to employees ₹ 23,44,098 Since rule 6 (1) of banking regulation act starts with" in addition to the business of banking" assessing officer treated other activities referred above as nonbanking activities and did not allow deduction under section 80 p. It is not in dispute that all the activities undertaken by the banks or permitted for the bank by RBI are not banking activities. Banking activity involves deposit and lending of money and therefore all other activities un .....

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by Bombay High Court reported in 132 taxman 226. In the said decision commission income from Electricity Company for collection of bills was treated as income attributable to business of banking and deduction under section 80 P was allowed. Since facts of the appellant are identical as far as commission on collection of electricity bills is concerned, the assessing officer is directed to allow deduction under section 80 P on this income. 2- As regards D mat charges, appellant tried to link it w .....

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. These services started after the aforesaid decision of apex court. These services are provided by share brokers also who are not at all connected with banking business. Since D mat services are relating to transactions in shares and securities and handling of deliveries consequent thereof, these are the services relating to capital market. The services are not regulated by RBI but the same is governed by Sebi. Therefore by no stretch of imagination D mat services can be treated as part of bank .....

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isallowance is therefore confirmed. 3- As regards income on account of special adhesive stamp, this activity also started much later and the same is not mentioned in rule 6 (1). The services can be provided by stamp vendors or any person authorized to provide the services. These are not exclusively provided by banks therefore if cannot be said that income from the service is from banking business. Since there is no banking activity involved in selling special adhesive stamps and these are not in .....

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he society and interest income earned by advancing housing loans and loans from PF deposits cannot be exempted under section 80 P. Appellant submitted that its employees are nominal members hence this decision does not apply. I do not agree with the appellant since the facts in that decision as well as of the appellant are same and therefore this decision squarely applies to the appellant. Just by making employees nominal members, their status will not change. They will remain employees and not .....

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. The assessee collects demat charges in question in furtherance thereof for opening demat accounts i.e. dematerialised form of its customers account in relation to security transactions and depositories services. The assessee has to follow a fee schedule in this regard for collecting the impugned demat charges. We deem it appropriate to extract section 6(1) of the Banking Regulation Act reading as follows :- 6. Form and business in which banking companies may engage (1) In addition to the busin .....

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transferable or negotiable or not; the granting and issuing of letters of credit, travellers' cheques and circular notes; the buying, selling and dealing in bullion arid specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuing on commission, underwriting and dealing in stock, funds, shares, debentures, debenture stock, bonds, obligations, securities and investments of all kinds: the purchasing and selling of bonds, scrips or other form .....

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ischarges and otherwise acting as an attorney on behalf of customers, but excluding the business of a [Managing Agent or Secretary and Treasurer] of a company. 6.1 A perusal of the above extracted provision makes it clear that these demat charges are for maintaining dematerialised form of assessee s investments made in securities at its customers behest. Learned Departmental Representative seeks to cover the same in the constituents category hereinabove. We find no merit in this plea since it is .....

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