TMI Blog2008 (9) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... ar Rajya Sahkari Bhoomi Vikas Co-operative Bank Ltd. is a bank registered under the Bihar State Co-operative Societies Act. Its object, according to the bye-laws, are as follows: "(i) To give loans to individual member of co-operative societies registered under the Act or corporate bodies after admitting them as member in accordance with the bye-laws. (ii) To float debenture on the security of its assets or land mortgages, Government guarantee and other assets and securities in the form or forms of hypothecation, pledge, lien, surety, agreement, bond deed, actionable claim, charge, promissory note, rehan, etc., obtained from and transferred to it by borrowers for such period and on such terms and conditions as have been approved by the trustee. (iii) To raise deposits and loans and to advance loans for the purposes enumerated under section 44B of the Act. (iv) To acquire such immovable properties and construct such buildings as it may consider necessary for proper conduct of its for the business. (v) To do such other things as incidental or conducive to attainment of the above objects." 2. In these appeals we are concerned with the assessment years 1989-90 and 1995-96 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onsideration of the limitation petition at the time of admission of the appeal. However, no order was passed at that time. 7. Before we take up the said appeal on the merits, it is expedient to consider the limitation petition. According to the stamp reporter limitation expired on March 22, 2002, whereas the appeal has been filed on April 12, 2002. 8. Mr. K. N. Jain, senior advocate appears on behalf of the appellant, whereas the Commissioner of Income-tax is represented by Mr. Harshwardhan Prasad. 9. In the application for condonation of delay it has been stated that the file was handed over by the assessee to the counsel to file appeal within time but due to some trouble in the eye of the counsel which ultimately led to surgical interference delay had occurred in filing the appeal. 10. This assertion has not been contested by the respondent. 11. We are of the opinion that sufficient cause has been shown for condoning the delay in filing this appeal. 12. Accordingly, the delay in filling the appeal is condoned. 13. As in both the appeals common question of law is involved, common arguments have been advanced by Mr. Jain on behalf of the assessee. 14. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said that the funds of the bank which were not lent to borrowers but were laid out in the form of deposits in another bank to add to the profit instead of lying idle necessarily ceased to be a part of the stock-in-trade of the bank, or that the interest arising therefrom did not form part of its business profits. Under the bye-laws, one of the objects of the appellant bank is to carry on the general business of banking and, therefore, subject to the Co-operative Societies Act, it has to carry on its business in the manner that ordinary banks do. It may be added that the various heads under section 6 of the Income-tax Act and the provision of that Act applicable to these various heads are mutually exclusive. Section 12 is a residuary section and does not come into operation until the preceding heads are excluded. In our opinion, the High Court was in error in treating interest derived from deposits as not arising from the business of the bank and, therefore, not falling within the income exempted under the notification." (underlining ours) 18. Mr. Harshwardhan Prasad, appearing on behalf of the Revenue, however, submits that the income derived from interest on investment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or easily realisable securities to meet any probable demand by the depositors. Provident fund amount belonged to the employees and it cannot be said to be stock-in-trade or circulating capital of the assessee and hence cannot be said that the interest earned is derived from the banking business or attributable to the same. The interest has not been earned from the money in stock-in-trade or circulating capital. It is not the case of the assessee that it placed the provident fund on which it earned the interest to enable it to carry on its banking business. In our opinion, the interest earned on such deposits necessary for the purpose of carrying on the banking business is to be treated as income attributable to the banking business. In that circumstance it shall also not make any difference whether the deposit is made from the stock-in-trade or circulating capital. However, the money, if does not belong to the assessee at all will make the difference and in such situation interest earned on such investment cannot be said to be attributable or derived from the banking business. 20. In the case of Bihar State Co-operative Bank Ltd. v. CIT [1960] 39 ITR 114 (SC) relied on by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Lords in its judgment in that case is that if a person in a fiduciary position receives any financial benefit arising out of the use of the property of the beneficiary, he cannot keep it unless he is authorized to do so. Applying that principle the House of Lords held that on the facts of the case the solicitor was not authorized to keep the interest either by custom or by implied agreement, although, as a matter of fact, a similar practice had long been followed by a number of solicitors in the United Kingdom. As seen earlier, the relevant rules of this High Court do not permit a solicitor to treat the moneys received by him from or on account of his clients as his personal moneys and such moneys are held by him in a fiduciary capacity. Even the income received from such moneys must equally be held by the solicitor in a fiduciary capacity. What the solicitor actually does with the income, i.e., whether he appropriates it to himself or not, is, in our opinion, a matter of no consequence. If he appropriates it to himself, it would simply amount to a breach of his fiduciary relationship and whatever may be the consequence in law would follow. But his unauthorized act of converting a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
