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TMI Blog2008 (9) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... rustee. (iii) To raise deposits and loans and to advance loans for the purposes enumerated under section 44B of the Act. (iv) To acquire such immovable properties and construct such buildings as it may consider necessary for proper conduct of its for the business. (v) To do such other things as incidental or conducive to attainment of the above objects." 2. In these appeals we are concerned with the assessment years 1989-90 and 1995-96. In these assessment years, the assessee had income from interest on provident fund amount of the employees as also rental income from the house property. 3. It is relevant here to state that the assessee had shown the interest on the investments of the employees' provident fund as its income in the profit and loss account. It also derived rental income from the house property. The assessee claimed deduction of both the income under section 80P(2) (a) (i) of the Income-tax Act, which was not granted by the Assessing Officer and its appeal before the Commissioner of Income-tax (Appeals) also failed. The assessee carried the matter further in appeal before the Patna Bench of the Income-tax Tribunal, hereinafter referred to as the Tribunal. The Tri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred in filing the appeal. 10. This assertion has not been contested by the respondent. 11. We are of the opinion that sufficient cause has been shown for condoning the delay in filing this appeal. 12. Accordingly, the delay in filling the appeal is condoned. 13. As in both the appeals common question of law is involved, common arguments have been advanced by Mr. Jain on behalf of the assessee. 14. Mr. Jain submits that the interest earned from the investment of the employees' provident fund is not the income of the assessee and merely the fact that it has been shown as the assessee's income in the profit and loss account will not make it is the assessee's income. 15. We do not find any merit in the submission of Mr. Jain. Merely showing the interest as income may not be decisive but the very fact that the assessee had made investment of the provident fund amount, earned interest thereon and in the absence of any material to show that interest has been credited in any other account, in the face of the assessee's own profit and loss account, there is no escape from the conclusion that the interest earned is the assessee's income, 16. Mr. Jain then submits that the income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are excluded. In our opinion, the High Court was in error in treating interest derived from deposits as not arising from the business of the bank and, therefore, not falling within the income exempted under the notification." (underlining ours) 18. Mr. Harshwardhan Prasad, appearing on behalf of the Revenue, however, submits that the income derived from interest on investment of the provident fund amount is neither derived from the business of banking or attributable to that. According to him, the matter is squarely covered by the decision of the Madhya Pradesh High Court in the case of M. P. State Co-operative Bank Ltd. V. Addl. CIT [1979] 119 ITR 327 and our attention has been drawn to the following passage from the said judgment (page 333): "As regards investment of provident fund, it is expressly provided in section 46 of the Co-operative Societies Act that provident fund cannot be used in the business of the society. It was contended before us that the provident fund does not belong to the assessee and, therefore, interest income from investment of provident fund in securities is not income of the assessee. The Tribunal negatived this contention by pointing out that inter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s made from the stock-in-trade or circulating capital. However, the money, if does not belong to the assessee at all will make the difference and in such situation interest earned on such investment cannot be said to be attributable or derived from the banking business. 20. In the case of Bihar State Co-operative Bank Ltd. v. CIT [1960] 39 ITR 114 (SC) relied on by Mr. Jain the interest earned on the deposit by the assessee-bank to Imperial Bank was treated as income from the business of the bank as the amount deposited with Imperial Bank was considered to be stock-in-trade and circulating capital. 21. Mr. Jain then submits that the interest out of the investment of the provident fund amount legally do not belong to the assessee and, therefore, cannot be treated as the assessee's money. Reliance has been placed on a decision of the Calcutta High Court in the case of CIT v. Sandersons and Morgans [1970] 75 ITR 433 and our attention has been drawn to the following passage from the said judgment (page 444): "In the instant case, we have already observed, the money received was money of the principal received by the agent in a fiduciary capacity, for being employed for the work of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the solicitor actually does with the income, i.e., whether he appropriates it to himself or not, is, in our opinion, a matter of no consequence. If he appropriates it to himself, it would simply amount to a breach of his fiduciary relationship and whatever may be the consequence in law would follow. But his unauthorized act of converting any part of the corpus or even the income derived there from which is not in accordance with the provisions of the rules of this High Court would not convert those amounts held by him in a fiduciary capacity into moneys held by him beneficially for himself." 23. We do not find any substance in the submission of the learned counsel and reliance on the aforesaid decision is absolutely misconceived. In the present case, the assessee had sought deduction not of the provident fund amount but the interest thereon. In the case of CIT v. Sandersons and Morgans [1970] 75 ITR 433 (Cal) the deposits made by the clients were credited in the profit and loss account and in the face of the legal position that the assessee was bound to refund the balance money, the court came to the conclusion that it is not the assessee's income. Here, as observed earlier, th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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