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2012 (5) TMI 87 - HC - Income TaxClaim to deduction under Section 80P(2)(a)(i) on interest earned on deposits made out of the non-SLR funds , especially since the income so earned cannot be said to be earned from the normal banking business/activities Held that - Decided by the Division Bench of this Court in Commissioner of Income Tax vs. M/s H.P. State Cooperative Bank Ltd (2009 - TMI - 201840 - HIMACHAL PRADESH HIGH COURT) held that interest on the deposits made by the Bank is directly attributable to the business of the banking - Deduction allowed against revenue.
Issues:
- Interpretation of Section 80P(2)(a)(i) of the Income Tax Act regarding deduction eligibility for interest earned on deposits made from non-SLR funds. - Applicability of previous judgments in similar cases to the current appeal. - Assessment of taxation on interest earned from non-SLR investment funds for the assessment year 2004-05. Analysis: 1. The judgment addressed the interpretation of Section 80P(2)(a)(i) of the Income Tax Act regarding the eligibility of a bank for deduction concerning interest earned on deposits made from non-SLR funds. The substantial question of law revolved around whether the income earned from such deposits could be considered as part of normal banking business activities. The Division Bench had previously answered a similar question in favor of the assessee in a related case. 2. The Court noted that a bunch of appeals had been filed by the Revenue, disposed of in line with a previous judgment involving the H.P. State Co-operative Bank Ltd. However, the instant appeal, based on similar facts, was not listed with those matters initially but was presented separately. 3. The appeal in question was admitted based on the substantial question of law concerning the entitlement of the assessee bank to deduction under Section 80P(2)(a)(i) for interest earned on deposits from non-SLR funds. The Court found this question to be akin to the one previously addressed in the case of H.P. State Co-operative Bank Ltd. 4. Specifically focusing on the assessment year 2004-05, the Court highlighted the Assessing Officer's decision to tax the income of the assessee derived from non-SLR investment funds. However, the Income Tax Appellate Tribunal ruled in favor of the assessee, granting exemption from taxation under Section 80P(2)(a)(i) of the Income Tax Act. 5. Ultimately, the Court found that the instant appeal was squarely covered by the precedent set in the case of H.P. State Cooperative Bank Ltd., emphasizing that the interest earned on deposits by the bank was directly linked to its banking business. Consequently, the substantial question of law was answered in favor of the assessee against the Revenue, leading to the rejection of the present appeal.
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