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TMI Blog2012 (11) TMI 428X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the property is not in any way attributable to banking business. Therefore, rental income received by the taxpayer cannot be treated as business income for the purpose of granting deduction u/s 80P(2)(a)(i). The ld. DR placed her reliance on the judgment of the jurisdictional High Court in the case of Kottayam Co-operative Land Mortgage Bank Ltd. v. CIT [1988] 172 ITR 443 and also the judgment of the Apex Court in the case of Totgar's Co-operative Sale Society Ltd. v. CIT [2010] 322 ITR 283. 4. On the contrary, Shri V Devarajan, the ld. representative for the taxpayer submitted that the taxpayer has let out the commercial premises / asset. Therefore, the rental income received on letting out of the commercial asset has to be treated as business income attributable to the business of the taxpayer, therefore, eligible for deduction u/s 80P(2)(a)(i) of the Act. The ld. representative has placed his reliance on the judgment of the Madras High Court in CIT v. Madurai Dist. Co-operative Bank Ltd. [1999] 239 ITR 700 and the Karnataka High Court in CIT v. Grain Merchants' Co-operative Bank Ltd. [2004] 267 ITR 742. 5. We have considered the rival submissions and also perused the mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivity or not, it is necessary that the activity of a bank falls under anyone of the activities mentioned in section 6 of the Banking Regulation Act or it should have some nexus with the activities which are mentioned in section 6 of the Banking Regulations Act. This section 6 of the Banking Regulation Act reads as follows: 6. Forms of business in which banking companies may engage - (1) In addition to the business of banking, a banking company may engaged in any one or more of the following forms of business, namely:- (a) The borrowing, raising or taking up of money, the lending or advancing of money either upon or without security; drawing, making, accepting, discounting, buying, selling, collecting and dealing in bills of exchange, hoondees, promissory notes, coupons, draft, bills of lading, railway receipts, warrants, debentures, certificates, scrips and other instructions, and securities whether transferable or negotiable or not; the granting and issuing of letters of credit, traveller's cheques and circular notes; the buying selling and dealing in bullion and specie; the buying and selling of foreign exchange including foreign bank notes; the acquiring, holding, issuin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for any exhibition or for any public general or useful object; (k) The acquisition, construction, maintenance and alteration of any building or work necessary or convenient for the purposes of the company; (l) Selling, improving, managing, developing, exchanging, leasing, mortgaging, disposing of or turning into account or otherwise dealing with all or any part of the property and rights of the company; (m) Acquiring and undertaking the whole or any part of the business of any person or company, when such business is of a nature enumerated or described in this sub-section; (n) Doing all such other things as are incidental or conducive to the promotion or advancement of the business of the company; (o) Any other form of business which the Central Government may, by notification in the Official Gazette, specify as a form of business in which it is lawful for a banking company to engage. (2) No banking company shall engage in any form of business other than those referred to in sub-section (1)." 7. A bare reading of the section 6 of the Banking Regulations Act clearly shows that the letting out of the property in no w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e (a). The provisions of clauses (a) and (c) are cumulative and mutually supplementing. The Kerala High Court further found that the limit specified in clause (c) are in relation to profit and gain attributable to activity other than one specified in clause (a). The Kerala High Court further found that if the rental income received by the society is attributable to an activity of the society then clause (c) would be attracted. The Kerala High Court further found that deduction u/s 80P(2) is available in respect of income of the co-operative society which are attributable to the activity in which the co-operative society is engaged. The Kerala High Court further found that letting out of the property is not an activity which falls under clause (c). Letting out of the property is not a commercial asset and the profit or gain received by the taxpayer is not from exploitation of commercial asset. Accordingly, the Kerala High Court held that the rental income received by the taxpayer on letting out of the surplus space is not eligible for deduction u/s 80P(2). 11. In the case on our hand also the taxpayer has let out the building. It is nobody's case that the commercial asset was explo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be construed as "Income from banking activity". At no stretch of imagination it could be said that rental income is attributable to banking business. 13. A similar view was taken by the Madras High Court in the case of Indian Overseas Bank Ltd v. CIT [2000] 246 ITR 206. The Madras High Court, after distinguishing the judgment of the Madhya Pradesh High Court in CIT v. National Newsprint & Paper Mills Ltd [1978] 114 ITR 388 found that the business of the taxpayer is banking and the business connection between the tenant and taxpayer has nothing to do with banking operation carried on by the taxpayer. Further, the Kerala High Court in Kottayam District Co-operative Bank Ltd. v. CIT [1991] 188 ITR 568 has also taken a similar view. Therefore, this Tribunal is of the considered opinion that the taxpayer is not eligible for deduction u/s 80P(2)(a)(i) in respect of rental income. By respectfully following the judgment of the Apex Court in the case of Totgar's Co-operative Sales Society Ltd. (supra) and the Kerala High Court in the case of Kottayam Co-operative Land Mortgage Ltd. (supra) we set aside the order of the Commissioner of Income-tax(A) and restore that of the assessing off ..... X X X X Extracts X X X X X X X X Extracts X X X X
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