9911796707
TMI Blog1998 (9) TMI 109X X X X Extracts X X X X X X X X Extracts X X X X ..... 0P(2)(a)(i) so far as the said interest was earned from investment of reserve funds. The applicant had statutory reserve funds which is required as per the provisions of the Gujarat Cooperative Societies Act and had also other reserve funds such as building fund, dividend equalisation fund, investment reserve, depreciation reserve and other funds which are reflected in the balance sheet. Hereto annexed are the details of the various reserve funds for asst. yr. 1991-92, corresponding accounting year being 1990-91. The respondent while raising this issue relied on a decision of the Madhya Pradesh High Court in the case of M.P. Co-operative Bank Ltd. vs. Addl. CIT (1979) 8 CTR (MP) 361 : (1979) 119 ITR 327 (MP). The respondent did not accept t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment of reserve funds as covered by s. 80P(2)(a)(i). 5. The respondent being aggrieved by the order of the CIT(A) filed an appeal before the Hon'ble Tribunal. In the meantime the decision of the Madhya Pradesh High Court came to be affirmed by the Supreme Court by its judgment Madhya Pradesh Co-operative Bank Ltd. vs. Addl. CIT (1996) 134 CTR (SC) 92 : (1996) 218 ITR 438 (SC). The Supreme Court judgment primarily relied on the provisions of the Madhya Pradesh Act and the Circular issued by the Registrar of Co-operative Societies Act for coming to the conclusion that the reserve could not be used for the business of the bank and, therefore, the interest earned by investment of such fund was not income from banking business and was, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restore his original order where he has treated all the reserve funds as falling within the ratio of the Madhya Pradesh High Court judgment. It is submitted that the Madhya Pradesh High Court judgment affirmed by the Supreme Court as well as the Rajasthan High Court judgment were only concerned with the statutory reserve funds which were obligatory to be created by co-operative societies out of the net profit and which could only be used for specific purposes set out in the said Act or in the circulars issued thereunder. Such a restriction could not possibly attach to other voluntary reserves created by the co-operative societies for other purpose and, therefore, the ratio of those decisions could never be made applicable to other reserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention that the Hon'ble Supreme Court decision in the case of MP Co-op. Bank Ltd. vs. Addl. CIT (1996) 134 CTR (SC) 92 : (1996) 218 ITR 438 (SC) relates to interest income derived from the statutory reserve. K.H. Kaji, the learned counsel on behalf of the assessee, in support of the application, has filed before us the copies of the judgments passed by the Hon'ble High Court as well as the Hon'ble Supreme Court in the case of Madhya Pradesh Co-op. Bank Ltd. vs. Addl. CIT (1979) 8 CTR (MP) 361 : (1979) 119 ITR 327 (MP) and Madhya Pradesh Co-operative Bank Ltd. vs. Addl. CIT (1996) 134 CTR (SC) 92 : (1996) 218 ITR 438 (SC). The relevant portions of the judgments have been highlighted to show that the Hon'ble Supreme Court as well as Madhya P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sentative opposed the prayer of the assessee and submitted that the decision of the Hon'ble Madhya Pradesh High Court covers all types of reserves and not only statutory reserves. These facts have already been considered by the Tribunal. Therefore, no rectification is required, which will amount to review of the order passed by the Tribunal. 3. We have heard both the sides and perused the material on record. In the decision of the Hon'ble Madhya Pradesh High Court in the case of Madhya Pradesh Co-op. Bank Ltd. vs. Addl. CIT (1979) 8 CTR (MP) 361 : (1979) 119 ITR 327 (MP), we find that the Hon'ble High Court has noticed the fact under s. 43(2) of the Act society is required to transfer 25 per cent of its profit to its reserve funds. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... High Court, which has been confirmed by the Hon'ble Supreme Court, has been referred. The relevant portion of the judgment is as follows: "5. The learned counsel for the appellant places reliance on the decision of this Court in Madhya Pradesh Co.-op. Bank Ltd. vs. Addl. CIT (1996) 134 CTR (SC) 92 : (1996) 218 ITR 438 (SC) : 84 Taxman 640, where in the decision of the Madhya Pradesh High Court in M.P. State Co-op. Bank Ltd. vs. Addl. CIT (1979) 8 CTR (MP) 361 : (1979) 119 ITR 327 (MP) was affirmed. The Bench held that circulating capital was that which was put into circulation or turned over to earn profits and the Govt. securities coming out of the reserve fund which could not be easily encashed and which could be utilised only when con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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