1985 (7) TMI 199 - AT - Income Tax

Summary

Issues:
1. Denial of collection charges deduction.
2. Treatment of locker rent for the purpose of s. 80P.

Issue 1: Denial of Collection Charges Deduction

The appeal was filed against the order of AAC Kolhapur regarding the denial of collection charges of Rs. 962 for the assessment year 1981-82. The Income Tax Officer (ITO) allowed 1/6th of the income from property but did not allow the collection charge deduction. The reason for disallowance was not clear, and the appellate order did not provide a rationale for holding the collection charges as non-deductible. The Appellate Tribunal directed the ITO to allow the collection charges as per law if not already allowed, as it seemed to be an oversight in the initial decision.

Issue 2: Treatment of Locker Rent for s. 80P

The second point in the appeal concerned the treatment of locker rent of Rs. 7,752 for the purpose of s. 80P. The ITO held that s. 80P(2)(a)(i) exempts income only from banking or providing credit facilities to members, which did not include locker rent. The Appellate Authority confirmed this decision based on the Banking Regulation Act of 1949, which defines banking as accepting deposits and providing credit facilities.

The appellant argued that the provision of lockers is intimately connected with banking activities, citing relevant sections of the Banking Regulation Act. They contended that locker rent income should be considered attributable to the business of banking. Referring to precedent cases, the appellant emphasized that even income from commission and brokerage in banking activities had been considered attributable to banking. However, the respondent highlighted that the concept of banking or provision of credit facilities did not encompass the activity of providing safe custody through lockers. The Tribunal held that, despite the close association between locker facilities and banking, lockers were not part of banking itself. The activity of providing lockers did not fall under banking or provision of credit facilities, as defined in the Banking Regulation Act.

In conclusion, the Appellate Tribunal partially allowed the appeal, directing the ITO to allow the collection charges deduction and upholding the decision regarding the treatment of locker rent for s. 80P. The judgment emphasized the importance of statutory definitions in determining the scope of deductions and exemptions under tax laws, particularly in relation to activities closely related to core business operations like banking.