2013 (3) TMI 68 - HC - Income Tax

Interest on Non SLR investments/CTR - whether would qualify for deduction u/s 80-P(2)(a) - Whether the investments made outside permissible limits of the Regional Rural Bank would qualify to be Bank Business - Held that - As decided in CIT, Ghaziabad v. Ghaziabad Zila Sahkari Bank, Ghaziabad 2013 (1) TMI 553 - ALLAHABAD HIGH COURT & 2013 (1) TMI 552 - ALLAHABAD HIGH COURT cooperative banks who are carrying on banking business are entitled for deduction under Section 80P(2)(a)(i) of the Act - in favour of assessee.

Summary

Issues:
1. Interpretation of Section 80P(2)(a) of the Income Tax Act, 1961 regarding deduction for interest on "Non SLR investments"/CTR.
2. Qualification of investments made outside permissible limits of the Regional Rural Bank as "Bank Business" for deduction under Section 80-P(2)(a).
3. Justification of canceling the penalty levied under section 271-B of the Act.

Analysis:

Issue 1:
The appeal involved a question regarding the interpretation of Section 80P(2)(a) of the Income Tax Act, 1961, specifically related to the deduction for interest on "Non SLR investments"/CTR. The Tribunal had to determine whether such interest qualified for deduction without establishing if the funds were utilized in the course of business. The Court referred to previous decisions concerning cooperative banks engaged in banking business being entitled to deduction under Section 80P(2)(a)(i) of the Act. The Court, after considering the arguments presented, upheld this interpretation, concluding that the appeal failed and was dismissed.

Issue 2:
Another issue in the appeal was whether investments made outside the permissible limits of the Regional Rural Bank could be considered as "Bank Business" for the purpose of claiming a deduction under Section 80-P(2)(a). The Court reviewed the facts of the case, where the Assessing Officer disallowed the exemption claimed under Section 80P(2)(a)(i) of the Act, leading to an appeal and subsequent dismissal by the Tribunal. The Court noted that investments made by cooperative societies engaged in banking business were eligible for the deduction under Section 80P(2)(a)(i) of the Act. Consequently, the Court dismissed the appeal based on this interpretation.

Issue 3:
The final issue addressed in the judgment was the justification for canceling the penalty levied under section 271-B of the Act. The Court did not delve into detailed analysis in this regard but mentioned that the appeal was dismissed based on the interpretation of Section 80P(2)(a) and the eligibility of cooperative banks for deductions under the same provision. The Court's decision to dismiss the appeal encompassed all the issues raised, including the cancellation of the penalty levied under section 271-B of the Act.

In conclusion, the judgment by the Allahabad High Court in this case clarified the interpretation of Section 80P(2)(a) of the Income Tax Act, 1961, regarding deductions for cooperative banks engaged in banking business. The Court's decision was based on previous rulings supporting the eligibility of cooperative banks for deductions under this provision, ultimately leading to the dismissal of the appeal.