2004 (6) TMI 238 - AT - Income Tax

Summary

Issues:
- Interpretation of whether the income of a cooperative bank from investments is attributable to the business of the bank and eligible for exemption under section 80P of the Income Tax Act.

Analysis:
The appeals by the Revenue were against the orders of the learned CIT(A) for assessment years 1990-91 and 1993-94. The common ground raised in these appeals was regarding the entire income of the cooperative bank from investments being attributable to the business of the bank and eligible for exemption under section 80P of the Act. The Revenue contended that the CIT(A) erred in holding so. The Departmental Representative relied on the AO's order and certain decisions of the Hon'ble apex Court and jurisdictional High Court to support their argument.

The counsel for the assessee argued that the decisions relied upon by the Revenue had been overruled by subsequent judgments. Specifically, the Hon'ble apex Court in the case of CIT vs. Karnataka State Co-op. Apex Bank and the decision in the case of Mehsana Distt. Central Co-op. Bank Ltd. vs. ITO reversed the earlier decisions cited by the Revenue. The Special Bench of the Tribunal, Ahmedabad Bench, had extensively analyzed this issue in the case of Surat District Co-op. Bank Ltd. & Ors. vs. ITO & Ors., concluding that interest income on various investments is exempt under section 80P(2)(a)(i) of the Act.

After considering the arguments and the relevant judgments, the Tribunal found merit in the assessee's contentions. The Tribunal noted that the decisions cited by the Revenue had been overruled by higher courts and that the Special Bench's decision in the Surat District Co-op. Bank Ltd. case was applicable to the current scenario. Therefore, the Tribunal upheld the order of the CIT(A) for both years under appeal, dismissing the Revenue's appeals.

In conclusion, the Tribunal ruled in favor of the assessee, stating that the income from investments in various financial instruments was attributable to the business of banking and eligible for deduction under section 80P(2)(a)(i) of the Income Tax Act. The appeals of the Revenue were consequently dismissed.