1984 (11) TMI 103 - AT - Income Tax

Additional Grounds, Banking Company, Income From Other Sources, Power To Admit Additional Ground, Rental Income

Summary

Issues Involved:
1. Exemption under section 80P(2)(c) of the Income-tax Act, 1961.
2. Exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961.
3. Applicability of the Income-tax Act and other relevant statutes to the appellant's activities.

Detailed Analysis:

1. Exemption under section 80P(2)(c) of the Income-tax Act, 1961:
The appellant, Saraswat Co-operative Bank Ltd., claimed exemption for rental income under section 80P(2)(c) for the assessment years 1980-81 and 1981-82. The ITO rejected this claim, stating that the rental income was not derived from activities as envisaged by section 80P(2)(c). The Commissioner (Appeals) upheld this decision, noting that section 80P(2)(e) specifically exempts income from renting godowns or warehouses, but does not extend to other rental income. The Commissioner (Appeals) concluded that the appellant was not engaged in any activity to earn this rental income, thus disqualifying it from exemption under section 80P(2)(c).

2. Exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961:
The appellant argued that the rental income should be exempt under section 80P(2)(a)(i) as it was a co-operative society engaged in banking business, and the rental income was incidental to this business. The Tribunal agreed with this contention, noting that the appellant had consistently claimed exemption for property income, and this income was part of the banking business. The Tribunal cited the Supreme Court's decision in CIT v. Mahalakshmi Textile Mills Ltd., which allows for claims under different provisions of law if justified by the facts.

3. Applicability of the Income-tax Act and other relevant statutes to the appellant's activities:
The Tribunal examined the appellant's bye-laws and the Maharashtra Co-operative Societies Act, 1960, which restrict co-operative societies from investing in immovable property without the Registrar's approval. The Tribunal found that the properties were acquired for the banking business, and the rental income was incidental to this business. The Tribunal also referred to the Banking Regulation Act, 1949, which allows banking companies to acquire, construct, and maintain buildings necessary for their purposes. Citing the Supreme Court's decisions in Cocanada Radhaswami Bank Ltd. and Bihar State Co-operative Bank Ltd., the Tribunal concluded that the rental income was part of the business income and thus eligible for exemption under section 80P(2)(a)(i).

Conclusion:
The Tribunal allowed the appeals, holding that the appellant was entitled to exemption under section 80P(2)(a)(i) for the rental income as it was part of the banking business. Alternatively, the appellant was also entitled to exemption under section 80P(2)(c) as the rental income was attributable to activities other than those specified in clauses (a) or (b) of section 80P(2). The appeals were thus allowed.