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TMI Blog2013 (10) TMI 463X X X X Extracts X X X X X X X X Extracts X X X X ..... plus funds is exempted. The income from either category of the deposits is certainly attributable to the business of banking. As long as the deposit of the surplus funds in other banks for the purpose of earning interest is not unauthorized or not barred by any of the applicable statutes, the income is certainly attributable to the business of banking. There is no concept of voluntary or non-statutory reserves. When the reserve fund of the society exceeds 25 per cent. of its working capital, the excess could be utilized in the business of the society with the sanction of the Registrar of Co- operative Societies If a co-operative bank derives income by lending money to its members, it being business of banking, is eligible for deduction. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P(2)(d) and not section 80P(2)(a). 3. Brief facts of the case are that with regard to the exemption u/s. 80P of the Act, the Assessing Officer has found that the assessee has declared net income of Rs. 35,88,673/- and claimed exemption u/s. 80P of the Act. The income stated to be interest income is earned out of the surplus funds beyond the SLR covered funds i.e., invested in UTI Mutual funds of Rs. 1,40,00,000/- and Rs. 80,00,000/- invested in fixed deposits. The income claimed exemption of Rs. 35,88,673/- is nothing but the income earned through the deposits/ investments made in various mutual funds and concerns but not carrying on the business of banking or providing credit facilities to its members or as illustrated u/s. 80P(2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (251 ITR 194), only interest income on SLR funds has to partake the character of business income. Thus, the assessee's income by way of deposit in non-SLR funds in mutual funds and fixed deposits is not exempt under the provisions of section 80P of the Act. 5. On the other hand, the learned AR relied on the judgement of jurisdictional High Court in the case of CIT vs. Andhra Pradesh State Co-operative Bank Ltd. (336 ITR 516) (AP). 6. We have heard both the parties and perused the material on record. We find the same issue was considered by the Andhra Pradesh High Court in the case of CIT vs. Andhra Pradesh State Co- operative Bank Ltd. (cited supra) wherein the High Court held as under: "The provisions of section 80P of the Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isions of the Reserve Bank of India Act, 1934, or the Banking Regulation Act, 1949, are all activities which are part of the business of banking. If section 80P(2)(a) of the Act is given a restrictive meaning as including the interest earned only on the statutory deposits made by a co-operative society, it would amount to supplying a casus omissus and has to be avoided by the court. Investment of funds by banks including the non-reserves is part of banking activities since no bank: would like its reserve funds to remain idle and not earn any interest. Therefore, the interest earned on such deposits is directly attributable to the business of banking and, therefore, exempt under section 80P(2)(a)(i) the Act." 7. In view of the above discus ..... X X X X Extracts X X X X X X X X Extracts X X X X
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