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2023 (1) TMI 1088 - HC - Income TaxDeduction u/s 80P - investments made in TIDCO and TNEB Bonds - case of the appellant that Section 80P(2)(a)(i) of the Act does not limit or confine the benefit of deduction only in respect of investments made in SLR - Non SLR investment would have to be tested on the basis of Section 80(2)(d) - whether the benefit under Section 80P(2)(a)(i) is available only in respect of SLR investments and not to non- SLR investments? - HELD THAT - It has been consistently held by various Courts that as long as it is Banking Business, the investment, whether it is SLR or non SLR may not make a difference - We are informed that there is no contrary view expressed in respect of the above issue. Yet another reason why we would think that the assessee must succeed is in view of the fact that Income Tax Act, being a Central Enactment, though normally, decisions rendered by other Courts would have persuasive value, in the case of Central Enactment, an attempt must be made not to depart from the view taken by other Courts unless there are sound and compelling reasons for consistency in taxing enactments is important. We do not find any compelling reason, for this Court to deviate from the views taken by other Courts. Reference made to Section 80P(2)(4) by the learned counsel for the Revenue may not have any bearing for the assessment year 2005-06 and 2006-07 for the above provision was made effective only from 01.04.2007. It is a cardinal principle of construction that every statute is prospective unless it is expressly or by necessary implication made to have retrospective operation Keshvan vs. State of Bombay 1951 (1) TMI 32 - SUPREME COURT - This presumption of prospectivity of any law is articulated in the following legal maxim viz., nova constitutio futuris formam imponere debet non praeteritis ( A new law ought to regulate what is to follow, not the past). The above maxim has been quoted with approval repeatedly by Indian Courts. Thus the benefit under Section 80P(2)(a)(i) is available to both SLR and non-SLR investments as long as it constitutes Banking Business . Decided in favour of assessee.
Issues Involved:
1. Eligibility for deduction under Section 80P of the Income Tax Act for investments in TIDCO and TNEB Bonds. 2. Applicability of the Supreme Court judgment in Totgar's Co-operative Sale Society Limited vs. ITO to the appellant. 3. Classification of income from investments under "Income from other sources" versus "Profits and Gains from Business or Profession." Detailed Analysis: 1. Eligibility for Deduction under Section 80P for Investments in TIDCO and TNEB Bonds: The primary issue is whether the appellant, a co-operative society engaged in banking, is entitled to claim deductions under Section 80P(2)(a)(i) of the Income Tax Act for investments made in TIDCO and TNEB Bonds. The appellant argued that Section 80P(2)(a)(i) does not restrict the benefit of deduction only to SLR (Statutory Liquidity Ratio) investments. Conversely, the respondent contended that only SLR investments qualify for the deduction, and non-SLR investments should be evaluated under Section 80(2)(d). The court concluded that the benefit under Section 80P(2)(a)(i) is applicable to both SLR and non-SLR investments as long as they constitute "Banking Business." The court emphasized that the provision should be read as a whole, and different clauses within a section should be harmonized to avoid inconsistency. The court referenced the judgment in Krishan Kumar v. State of Rajasthan, highlighting the principle of harmonious construction, which dictates that conflicting clauses should be interpreted in a way that gives effect to both. 2. Applicability of the Supreme Court Judgment in Totgar's Co-operative Sale Society Limited vs. ITO: The appellant questioned the applicability of the Supreme Court judgment in Totgar's Co-operative Sale Society Limited vs. ITO, arguing that it pertains to credit societies and not banking societies. The court found that the judgment in Totgar's case does not directly apply to the appellant's situation, as the appellant is a co-operative society engaged in banking. The court cited various judgments, including Commissioner of Income Tax v. Andhra Pradesh State Cooperative Bank Ltd and Commissioner of Income Tax v. Muzaffar Nagar Kshetriya Gramin Bank Ltd, which support the view that income from both SLR and non-SLR investments is attributable to banking business and qualifies for deduction under Section 80P(2)(a)(i). 3. Classification of Income from Investments: The Tribunal had previously held that income from investments should be assessed under "Income from other sources" rather than "Profits and Gains from Business or Profession," thereby disqualifying it from deduction under Section 80P. The court disagreed, stating that as long as the investments are part of the banking business, the income should be classified under "Profits and Gains from Business or Profession." The court noted that the Income Tax Act does not distinguish between income from statutory and non-statutory deposits for co-operative banks engaged in banking. The court also emphasized the importance of consistency in the interpretation of central enactments like the Income Tax Act, suggesting that deviations from established judicial interpretations should only occur for compelling reasons. The court found no such reasons to deviate from the views taken by other courts on this issue. Conclusion: The court allowed the Tax Case Appeal, holding that the benefit under Section 80P(2)(a)(i) is available for both SLR and non-SLR investments as long as they constitute "Banking Business." The court rejected the respondent's argument that non-SLR investments should be evaluated under Section 80(2)(d) and clarified that the classification of income from these investments should be under "Profits and Gains from Business or Profession." The court also noted that Section 80P(4), which limits the applicability of Section 80P to certain co-operative banks, does not apply to the assessment years in question (2005-06 and 2006-07) as it was effective only from 01.04.2007.
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