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TMI Blog2014 (1) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... es Society Ltd. [2010 (2) TMI 3 - SUPREME COURT] - interest on income-tax refund cannot be considered to be operational income. The interest on such refund of income-tax has to be assessed under the head "Income from other sources” - Payment of income-tax has nothing to do with any business/activity - Payment of income-tax comes much after the completion of the entire transaction/activity - Total income would include all incomes irrespective of the source from which it was derived - However, deduction under section 80P(2)(a)(i) is only on the operational income from banking activity - Payment of income tax is a statutory liability on the total income irrespective of the source from which it was earned - The payment of income-tax is an application of income after it was earned to discharge the statutory liability under the Income-tax Act - The interest on income-tax refund has to be classified as "income from other sources" and it cannot be considered as "operational income" from banking activity – decided against Assessee. - I.T.A No. 645/Coch/2010 - - - Dated:- 19-4-2013 - Shri N.R.S. Ganesan and Shri B.R. Baskaran, JJ. For the Appellant: Shri N.S Rajagopal For the Resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se. Since the interest on income-tax refund is attributable to banking business, according to the learned representative, the taxpayer is eligible for deduction under section 80P in respect of interest on income tax refund. 4. On the contrary, Smt. S. Vijayaprabha, the learned Departmental representative submitted that interest on income-tax refund has no nexus with the business of the taxpayer. According to the learned Departmental representative, interest on income-tax refund has to be classified as "income from other sources", therefore, it cannot be considered to be operational income from banking business. According to the learned representative, the Mumbai Special Bench of this Tribunal in Maharashtra State Co-operative Bank Ltd. [2010] 2 ITR (Trib) 543 (Mumbai) has not considered the judgment of the apex court in the case of Totgar's Co-operative Sales Society Ltd. [2010] 322 ITR 283 (SC). According to the learned Departmental representative, in view of the judgment of the apex court in the case of Totgar's Co-operative Sales Society Ltd. [2010] 322 ITR 283 (SC), only the operational income from banking business alone is eligible for deduction under section 80P(2)(a)(i) an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this section. The Legislature employed the words "the whole of the amount of profit and gains of business attributable to anyone or more of such activities". Now the question arises for consideration is when the taxpayer is engaged in the business of banking, whether all kinds of activities would include within the phrase "any such activities"? This Tribunal is of the considered opinion that rule of ejusdem generis or noscitur a sociis would come into operation for interpreting the words "any such activities". Therefore, the words "any such activities" employed by the Legislature have to be in connection with the business of the taxpayer. An activity which is not connected with banking operation cannot come or fall within the phrase "any such activities". Therefore, any profit or gain of the taxpayer which is attributable to banking business or which has nexus with the banking business is eligible for deduction under section 80P(2)(a)(i) of the Act. 8. The next question, therefore, arises for consideration iswhether interest on income-tax refund would have any nexus with the business of banking ? In other words, whether the interest on income-tax refund would be "attributable to" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C of the Act, at the relevant time, dealt with deduction in respect of profits retained for export business. The scope of section 80HHC is, therefore, different from the scope of section 80P of the Act, which deals with deduction in respect of income of cooperative societies. Even Explanation (baa) to section 80HHC was added to restrict the deduction in respect of profits retained for export business. The words used in Explanation (baa) to section 80HHC, therefore, cannot be compared with the words used in section 80P of the Act which grants deduction in respect of 'the whole of the amount of profits and gains of business'. A number of judgments were cited on behalf of the assessee(s) in support of its contention that the source was irrelevant while construing the provisions of section 80P of the Act. We find no merit because all the judgments cited were cases relating to co-operative banks and the assessee-society is not carrying on banking business. We are confining this judgment to the facts of the present case. To say that the source of income is not relevant for deciding the applicability of section 80P of the Act would not be correct because we need to give weightage to the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Totgar's Co-operative Sales Society Ltd. [2010] 322 ITR 283 (SC), the Andhra Pradesh High Court found that the apex court was not dealing with the case relating to co-operative bank and it was confined to the facts of that case. Accordingly, in respect of interest on voluntary reserve was found to be eligible for deduction under section 80P(2)(a)(i) of the Act. No doubt, investment on voluntary reserve is attributable to banking business. Even otherwise, a banking company is entitled to invest the funds in any of the securities since investment is also an activity of banking within the meaning of Banking Regulation Act. Therefore, in our opinion, this judgment of the Andhra Pradesh High Court in the case of Andhra Pradesh Cooperative Bank Ltd. [2011] 336 ITR 516 (AP) may not be of any assistance to the taxpayer. 13. In the case before us, interest on income-tax refund has arisen out of the payment of income-tax. Payment of income-tax has nothing to do with any business/activity. Payment of income-tax comes much after the completion of the entire transaction/activity. Total income would include all incomes irrespective of the source from which it was derived. However, deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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