2010 (3) TMI 181 - HC - Income Tax

Deduction u/s s 80(P) (2)(a)(i) - income earned from utilization of its reserve funds being statutory reserves u/s 67(2) of the Gujarat Cooperative Societies Act, 1961 - income earned from utilization of its voluntary reserves other than the statutory reserves income earned from locker rent Held that following the decision in the matter of Commissioner of Income Tax v. Nawanshahar Central Co-operative Bank Ltd 2008 -TMI - 11702 - PUNJAB AND HARYANA High Court SLP dismissed by the SC , in respect of income from statutory reserves eligible for deduction under Section 80P (2)(a)(i) of the Income Tax Act, 1961 interest from locker rent is also eligible for deduction

Summary

Issues:
1. Challenge to order passed by the Income Tax Appellate Tribunal regarding deduction under Section 80P(2)(a)(i) for income earned from reserve funds.
2. Entitlement of the assessee bank to claim deduction under Section 80P(2)(a)(i) for income from voluntary reserves.
3. Disallowance of locker rent deduction under Section 80P(2)(a)(i).

Analysis:
The High Court was approached by the Revenue under Section 260A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal regarding the deduction under Section 80P(2)(a)(i) for the income earned from reserve funds. The questions of law raised for determination included the Tribunal's decision on the claim of the assessee bank for deduction under Section 80P(2)(a)(i) in relation to income earned from the utilization of statutory reserves under the Gujarat Cooperative Societies Act, 1961. The Court referred to a previous judgment regarding admissibility of deduction under Section 80P(2)(a)(i) for interest income on various investments, emphasizing the statutory nature of the investments as a basis for eligibility for the deduction.

The Court highlighted that the Tribunal's decision was in line with the previous judgment, which had been upheld by the Supreme Court. Additionally, a Division Bench of the same Court had already dismissed a similar appeal regarding earlier assessment years. Consequently, the Court dismissed the appeal by the Revenue, affirming the eligibility of the assessee bank for the deduction under Section 80P(2)(a)(i) for income earned from the utilization of reserve funds. The judgment emphasized the statutory nature of the investments as a key factor in determining the admissibility of the deduction under the relevant provisions of the Act.

Overall, the judgment provided a clear analysis of the legal issues involved, highlighting the significance of statutory reserves and investments in determining the eligibility for deductions under the Income Tax Act. The Court's decision was based on established legal principles and previous judgments, ensuring consistency in the application of the law to similar cases.