TMI Blog2001 (8) TMI 9X X X X Extracts X X X X X X X X Extracts X X X X ..... K. SABHARWAL. and ASHOK BHAN. JUDGMENT The judgment of the court was delivered by S. P. BHARUCHA J.- These appeals have been referred to a Bench of three learned judges, in view of the apparent conflict between the two judgments (of Benches of two learned judges of this court) in Madhya Pradesh Co-operative Bank Ltd. v. Addl. CIT [1996] 218 ITR 438 (SC) and CIT v. Bangalore 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 81 of the Income-tax Act. The court noted that a cooperative bank was legally obliged to place certain Government securities with the State Bank or the Reserve Bank of India and these securities could not be withdrawn by the bank at its will and could only be withdrawn in certain situations, as referred to herein above. It was, therefore, difficult, the court said, to comprehend 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Bench which decided the Bangalore District Co-operative Central Bank Ltd. case [1998] 233 ITR 282 (SC) that the decision in the case of Madhya Pradesh Co-operative Bank Ltd. [1996] 218 ITR 438 (SC) was rendered on its own facts. The latter decision was clearly a reasoned decision. The question is whether we agree with the reasoning in Madhya Pradesh Co-operative Bank Ltd. [1996] 218 ITR 438 (SC). There is no doubt, and it is not disputed, that the assessee-co-operative hank is required to place a part of its funds with the State Bank or the Reserve Bank of India to enable it to carry on its banking business. This being so, any income derived from funds so placed arises from the business carried on by it and the assessee has not, b ..... X X X X Extracts X X X X X X X X Extracts X X X X
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