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2001 (8) TMI 9

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....angalore District Co-operative Central Bank Ltd. [1998] 233 ITR 282 (SC). The question in appeal relates to what was section 81 and is now section 80P of the Income-tax Act, 1961, which reads thus : "80P. (1) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in sub-section (2), in computing the total income of the assessee. (2) The sums referred to in sub-section (1) shall be the followings namely : (a) in the case of a cooperative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or ....

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....bow such Government securities relating to the reserve fund could be considered the bank's stock-in-trade or circulating capitals It was understood in banking parlance that circulating capital was that which was put into circulation or turned over to earn profit. Government securities coming out of the reserve fund, which could not be easily encashed and which could be utilised only when the contingencies mentioned arose, could not be considered circulating capital or stock-in-trade. The court, therefore, came to the conclusion, on first principles, that the interest on the Government securities placed with the State Bank or the Reserve Bank of India would not qualify for exemption under section 81 (now, section 80P) of the Income-tax Act. ....