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TMI Blog1982 (7) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... 79] 119 ITR 327 and had reopened the assessments purportedly under section 147 of the Income-tax Act, 1961 ('the Act'). The assessee argued that it was entitled to the exemption in view of the decision of the Allahabad High Court in CIT v. Co-operative Cane Development Union Ltd. [1979] 118 ITR 770 and also some other cases. The assessee's objections were found unacceptable and the ITO included the following further income of Rs. 36,752 for the assessment year 1975-76, Rs. 2,28,794 for the assessment year 1976-77, Rs. 3,18,885 for the assessment year 1977-78 and Rs. 2,77,606 for the assessment year 1978-79. The assessee repeated its stand before the first appellate authority, this time, with success. The first appellate authority found that the decision of the Madhya Pradesh High Court rested on the wordings of section 81 of the Act before its substitution by section 80P of the Act. According to him, the presence of the words 'attributable to' in section 80P enlarged its scope. He found that the decision of the Allahabad High Court was based upon the interpretation of the words 'attributable to' in the decision of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore, claimed that the last word has been said in favour of the assessee's claim for exemption. He further pointed out that some of the decisions relied upon by the revenue were in the context of section 81 (prior to the introduction of section 80P) as pointed out by the learned Commissioner (Appeals). 3. We have carefully considered the records as well as the arguments. The assessee is an apex co-operative society acting as an apex institution for credit co-operative societies in the State. This is its only business. Besides income from interest on advances made to the other co-operative societies, it has also interest on securities, interest on deposits and dividends from member societies. There is no dispute regarding the claim for exemption in respect of income under other heads of income except in respect of interest on securities which were invested out of reserve fund. It is common ground that 25 per cent of the profits had to be carried to the reserve fund and that under rule 23 of the Karnataka Co-operative Societies Rules, 1960, such reserve fund had to be invested in approved securities in the manner laid down under section 58 of the Karnataka Co-operative Societies' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at it has ceased to be business income. This has been established long time ago. The Supreme Court in CIT v. Cocanada Radhaswami Bank Ltd. [1965] 57 ITR 306 has referred to a number of earlier decisions and stated as under : " The heads described in section 6 and further elaborated for the purpose of computation of income in sections 7 to 10 and 12, 12A, 12AA and 12B are intended merely to indicate the classes of income : the heads do not exhaustively delimit sources from which income arises. This is made clear in the judgment of this Court in the United Commercial Bank Ltd. [1965] 55 ITR 17, 24 (SC), that business income is broken up under different heads only for the purpose of computation of the total income : by that break up the income does not cease to be the income of the business, the different heads of income being only the classification prescribed by the Indian Income-tax Act for computation of income. " Hence, ground No. 3 in all these appeals seeking restoration of the reassessment orders merely on the ground that income from the securities has been assessed as interest on securities is devoid of any merit. This is not a case where idle surplus, funds have been uti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on by it, if it is--- (a) a society engaged in carrying on the business of banking or providing credit facilities to its members ; Provided that, in the case of a co-operative society which is also engaged in activities other than those mentioned in this clause, nothing contained herein shall apply to that part of its profits and gains as is attributable to such activities and as exceeds fifteen thousand rupees." The words 'attributable to' are, no doubt, there. But these words qualify, activities other than those exempted. Again the decision of the Madhya Pradesh High Court did not turn on the words 'attributable to' which were judicially interpreted by the Supreme Court even as noticed in the Allahabad High Court decision. Hence, what we are concerned with is not whether the securities form circulating capital or not for purpose of ascertaining whether the assessee would be entitled to exemption on interest from securities. We have to find whether the interest income is attributable to the assessee's business in any of the listed activities. Since the assessee's business was 'banking or providing credit facilities to its members', we have to hold that the assessee was r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... society, which has invested its available funds in securities and had received some interest thereon, is not entitled to any exemption in regard to such interest. Mere absence of a contrary allegation on the part of the Commissioner to the effect that the securities were not held as part of the assets of banking business, it was considered justified, setting aside the order of the Commissioner as well a that of the ITO. In other words, the view of the Gauhati High Court was that, prima facie, interest income from securities of a similar co-operative apex bank was eligible for exemption under section 81 even with its narrower scope compared to the present section 80P. Hence, in any view of the matter, we find no justification for withdrawing the exemption earlier allowed by the ITO in the case of the assessee which was obliged to buy the securities in order to remain in business of 'banking for providing credit facilities to its members', a business specifically listed under sub-clause (i) of clause (a) of sub-section (2) of section 80P. It is possible to hold that interest income, in the facts of the assessee's case, is business income in every sense. At any rate, there cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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