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TMI Blog2003 (10) TMI 21X X X X Extracts X X X X X X X X Extracts X X X X ..... Co-operative Bank (hereinafter referred to as "the assessee"), engaged in banking activity. The assessee filed its return for the assessment years 1989-90, 1990-91 and 1991-92. The Assessing Officer, while completing the assessment, took the view that the rental income received by the assessee in letting out the portion of the building partly occupied by it and the interest received from setting apart certain funds as reserve fund, does not come within the purview of section 80P(2)(a)(i) of the Act and as such are not deductible while computing the income of the assessee. Aggrieved by the said assessment order, the assessee preferred an appeal to the Commissioner of Income-tax (Appeals)-II (hereinafter referred to as "the Appellate Commissioner"). The Appellate Commissioner, by means of his order dated March 16, 1993, allowed the appeals accepting the contention of the assessee that the rental income received by it as well as the interest received on reserve fund are exempted from payment of tax under section 80P(2)(a)(i) of the Act. Aggrieved by the said order of the Appellate Commissioner, the Revenue took up the matter in appeal to the Tribunal. The Tribunal, as noticed by us ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as making an exception to clause (a)(i) of sub-section (2) of section 80P of the Act wherein it is provided that if a co-operative society carrying on banking business receives income from house property, such an income is liable to be taxed under section 22 of the Act. It is his submission that when Parliament had made a distinction between the income received from banking business and the income received from non-banking business by way of rental income on account of letting out of premises belonging to the assessee, it is not permissible for the assessee to claim exemption relying upon clause (a)(i) of subsection (2) of section 80P of the Act. It is also his submission that the assessee cannot derive any assistance from clauses (k) and (l) of sub-section (1) of section 6 of the Banking Regulation Act, 1949 (hereinafter referred to as "the Regulation Act"), as according to learned counsel the said provision only empowers the banking institution to carry on certain activities which are not considered as a banking business. In this connection, he referred to us the language employed in section 6 of the Regulation Act wherein it is referred that in addition to the business of bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion made at page 819 of the judgment. They also relied upon the judgment of the hon'ble Supreme Court in the case of CIT v. Ramanathapuram District Co-operative Central Bank Ltd. [2002] 255 ITR 423 and drew our attention to pages 424 and 425 of the judgment. Now, we will proceed to consider each one of the contentions advanced by Sri Sesachala. So far as the first contention is concerned, the same is covered against the Revenue by our earlier decision rendered in the case of Karnataka Central Co-operative Bank Ltd. [2004] 266 ITR 635. In the said decision, we have taken the view that the income received out of the reserve fund is exempted from payment of tax. The said decision was rendered by us following the decision of this court rendered in the case of CIT v. Sri Ram Sahakari Bank Ltd. [2004] 266 ITR 632, made in I.T.A. No. 137 of 2002 disposed of on September 5, 2002, wherein the Division Bench of this court following the decision of the hon'ble Supreme Court in the case of Bihar State Co-operative Bank Ltd. v. CIT [1960] 39 ITR 114, has taken the view that the income received out of reserve fund is exempted from payment of tax. In the case of Bihar State Co-operative Bank Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary or convenient for the purpose of the banking company and also selling/improving or leasing or otherwise dealing with all or any part of the property and rights of the company, also should be treated as a banking business. No doubt, it is true, as contended by Sri Sesachala that the businesses referred to in clauses (a) to (o) of sub-section (1) of section 6 of the Regulation Act cannot be treated as a banking business within the meaning of clause (b) of section 5 of the Regulation Act. But as noticed by us earlier, section 6 of the Regulation Act intends to make several businesses referred to in clauses (a) to (o) of sub-section (1) of the Act as "banking business" in addition to the definition of "banking" provided under clause (b) of section 5 of the Regulation Act. In support of our view, we derive support from the observation made by the hon'ble Supreme Court in the case of Gujarat State Co-operative Bank Ltd. [2001] 251 ITR 522. In the said decision, while considering the question whether locker rent received by the banking company is not deductible under section 80P(2)(a)(i) of the Act, the hon'ble Supreme Court has taken the view that the safe-deposit vault is part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd such income is not free from tax under that head of exemption. The expression 'marketing' is an expression of wide import. It involves exchange functions such as buying and selling, physical functions such as storage, transportation, processing and other commercial activities such as standardisation, financing, marketing intelligence, etc. Such activities can be carried on by an apex society rather than a primary society." In our view, the provisions contained in clause (f) of sub-section (2) of section 80P of the Act strongly relied upon by Sri Sesachala, are of no assistance to him. The said clause provides that the income derived by the housing society is chargeable under section 22 of the Income-tax Act. The housing society referred to in clause (f) of the said section must be understood as a society which is not carrying on banking business or providing credit facilities which is included under section 80P(2)(a)(i) of the Act. So far as the assessee is concerned, as noticed by us earlier, it is not in dispute that the assessee is carrying on the business of banking. Under these circumstances, the provisions of clause (f) of the section cannot control the benefit of exempti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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