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TMI Blog2008 (3) TMI 321X X X X Extracts X X X X X X X X Extracts X X X X ..... 12 of 1990 - - - Dated:- 28-3-2008 - CHANDRAMAULI KR. PRASAD ACTG. C. J. and MIHIR KUMAR JHA J. Prakash Sahay for the Revenue. Ajay Kumar Rastogi for the assessee. JUDGMENT CHANDRAMAULI KR. PRASAD ACTG. C. J.- The Patna Bench of the Income Appellate Tribunal, at the instance of the assessee after drawing the statement of the case has referred the following questions for our answer : "1. Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the sum of Rs. 15,98,590 received by way of interest on bank deposit is not ancillary and incidental to carrying on of the business of providing credit facility to its members and as such, exempt under section 80P(2)(a)(i) of the In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer was of the view that the assessee shall not be eligible for deduction of the following items under section 80P(2)(a)(i) of the Income-tax Act, hereinafter referred to as the Act. (i) Rs. 15,98,591- Interest on deposits made with the bank, (ii) Rs. 1,00,000-Managerial subsidy received from the State Government, (iii) Rs. 1,46,600-Group insurance premium received. 3. The Assessing Officer proceeded on the basis of the net profit as per the profit and loss account shown by the assessee at Rs. 5,08,290 and after making certain additions assessed it on total income of Rs. 7,81,460. 4. The assessee aggrieved by the order of the Assessing Officer preferred an appeal before the Commissioner of Income-tax (Appeals), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Revenue, however, contends that the provisions of section 80P(2)(a)(i) of the Act should be strictly construed and the deductions admissible under the aforesaid provision shall be available only to the income arising out of one or more activities specified in that section. It has been pointed out that the deductions under the aforesaid provisions shall be admissible only when there is direct or proximate nexus between the income on the one hand and the activity specified on the other hand. 9. Having considered the rival submissions, I am of the opinion that the interest earned on the deposits made, does not arise out of one or more of the activities specified in section 80P(2)(a)(i) of the Act but the interest received by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purposes of carrying on the banking business, the income derived therefrom would be income from the assessee's business. We are unable to take the view that found favour with the Bench that decided the case of Madhya Pradesh Co-operative Bank Ltd. [1996] 218 ITR 438 (SC) that only income derived from circulating or working capital would fall within section 80P(2)(a)(i). There is nothing in the phraseology of that provision which makes it applicable only to income derived from working or circulating capital. In the premises, we take the view that the decision of this court in the case of Madhya Pradesh Co-operative Bank Ltd. [1996] 218 ITR 438 (SC) does not set down the correct law and that the law is as we have put it above. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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