9911796707
TMI Blog2020 (12) TMI 222X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of Hon ble Gujrat High Court in CIT vs. Baroda Peoples Co-operative Bank Ltd. (supra), so the view of AO is a plausible view and therefore Ld. PCIT erred in invoking the revisional jurisdiction u/s 263 without satisfying the condition precedent essential to invoke revisional jurisdiction. PCIT ought not to have invoked the power u/s 263 and therefore, the invoking of the revisional jurisdiction itself is held to be bad in law and therefore quashed. - Appeal of the assessee is allowed. X X X X Extracts X X X X X X X X Extracts X X X X ..... heard both the parties and perused the records. At the outset it was pointed out by the Ld. A.R Shri Soumitra Chowdhury that the Ld PCIT erred in relying on the decision of Hon'ble Supreme Court in the case of Totgar's Co- operative Sales Society Ltd. (supra). According to Ld. A.R, this case law [Totgar's Co-operative Sales Society Ltd. (supra)] is not applicable in the case of assessee because that was a society providing credit facilities to its members and not a bank like assessee. Further, according to ld. A.R, during the assessment proceedings the Assessing Officer asked the assessee to bring the documents pertaining to the claim of assessee in respect of deduction under section 80P of the Act, and after perusing the same only the Assessing Officer has accepted that the amount of interest received from the Bond of NABARD as eligible for deduction u/s 80P of the Act along with interest on the deposit with West Bengal Co-operative Bank/Hooghly District Co-operative Bank/Government Securities to the tune of ₹ 5,23,157/- which is discernible from perusal of page 2 of assessment order. According to ld. A.R, the issue whether co-operative bank i.e. the assessee is eligible for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibed nature, ld. Counsel for the assessee reiterated the submissions made before the authorities below specified vide sub-clause (i) to (vii). In the event of a co-operative society carrying on any one or more such activities the whole of the amount of profits and gains of business attributable to any one or more activities shall be deducted. Thus, the provision itself gives an inherent indication that for the purpose of constituting the sum deductible while computing the total income of the assessee, the sum has to be the amount of profits and gains of business. It is necessary to take note of the fact that in sub-section (2) of section 80P of the Act the word "income" is not used but the word used is "sum" which is the " whole of the amount of profits and gains of business". Therefore, under sub-section (1) the gross total income has to include income from any of the specified activities and for the purpose of deduction the sums specified in sub-section (2) shall be deducted in computing the total income of an assessee, namely, a co-operative society. Before analysing sub-clause (i) of clause (a) of sub-section (2) of section 80P of the Act it is necessary to take note that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tutes "business of banking"; because the whole of the amount of profits and gains of business attributable to business of banking is deductible while computing the total income of an assessee, where an assessee is a co-operative society. Therefore, a twofold inquiry is contemplated : firstly, what is the meaning to be assigned to the phrase business of banking; and secondly, what would be the profits and gains attributable to business of banking. …………………………… ……………………………. 58. …………………………. Therefore, on the one hand, an entity carrying on the business of banking is required to accept deposits which are repayable on demand or permitting withdrawal in any of the specified modes, and on the other hand, the funds generated by acceptance of deposits are available for the purpose of lending or investment. In a given case, a bank may accept deposits and merely invest them, and earn profits from the difference between the rates of interest paid on the deposits and ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and that is the normal course of business of a bank. The moneys laid out, in the form of deposits as in the instant case would not cease to be a part of the circulating capital of the appellant nor would they cease to form part of its banking business. The returns flowing from them would form part of its profits from its business. In a commercial sense the directors of the company owe it to the bank to make investments which earn them interest instead of letting moneys lie idle. It cannot be said that the funds of the bank which were not lent to borrowers but were laid out in the form of deposits in another bank to add to the profit instead of lying idle necessarily ceased to be a part of the stock-in-trade of the bank, or that the interest arising therefrom did not form part of its business profits.(emphasis supplied) ……………. 69. The question therefore would arise as to whether any distinction can be drawn between so-called surplus funds / idle funds and statutory investments. It is necessary to bear in mind that a reserve per se does not yield any income. It is the investment of the fund backing a reserve which would yield income. Therefore, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely on. Thus, a depositor banks on a particular bank or a banker while making deposit in the bank. The only way the depositor gains confidence, places reliance on, or banks upon a particular establishment, is by looking at the total of the assets of the bank concerned. The assets would include all investments net of liabilities. In other words a balance sheet which reflects sound financial health of a bank would get preference over an establishment whose banker is required to invest in various modes, including in securities of different kinds to carry on the business of banking. It is in this context that the concept of easily realizable securities, investments wherefrom moneys are readily available, comes into the sphere of banking. The business is not only to be transacted by a banker alone. The customer is an equally vital component of such a business and it is the trust that he has in a particular establishment which ultimately permits the establishment to carry on the business of banking. Thus, all investments, even if one accepts the Revenue's artificial distinction, surplus or not, are essential and conducive to the promotion or advancement of the business of banking. &hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(a)(i) of the Act; (xii) Definition of "working capital" under section 2(24) of the GCS Act cannot be restricted to mean money raised by borrowing; (xiii)……………………… (xiv) ……………… (xv) Section 80P(2)(a)(i) of the Act requires a co-operative society, and not a co-operative bank defined under the GCS Act, to be engaged in carrying on business of banking; hence, it is not possible to restrict the scope of the business to the definition of "banking" under Section 5(b) of the BR Act; (xvi)……………. (xvii)……………….. (xviii)………………….. (xix)………….. (xx) Whatever be the nomenclature of a reserve, the funds of an assessee in totality are conglomerate of the total amount of deposits / investments, profits and other realizations; (xxi) The requirement of investment being in easily realizable securities or money being readily available for meeting the demand made by the depositor is taken as the touchstone of the business of b ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
