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of <h1>High Court rules interest on bank deposits is business income under Income Tax Act</h1> <h3>Commissioner of Income Tax, Shimla Versus M/s Himachal Gramin Bank,</h3> Commissioner of Income Tax, Shimla Versus M/s Himachal Gramin Bank, - TMI Issues:1. Interpretation of Section 80P(2)(a)(i) of the Income Tax Act regarding deduction for interest earned on deposits.2. Application of previous judgments by the Supreme Court in similar cases.Analysis:The High Court of Himachal Pradesh addressed two main issues in the judgment. The first issue involved the interpretation of Section 80P(2)(a)(i) of the Income Tax Act concerning the deduction for interest earned on deposits made by a bank. The court considered whether the income from such deposits could be considered as earned from normal banking activities. The court referred to previous judgments by the Apex Court and analyzed the scope of the term 'attributable to' in conjunction with banking activities. The court emphasized that any banking institution would invest its funds to earn income, and such investments were deemed as part of banking activities. Therefore, the interest earned on deposits, including non-SLR funds, was held to be directly attributable to the business of banking. The court ruled in favor of the assessee on this issue.The second issue involved the application of a previous judgment by the Supreme Court in a similar case related to the income from the investment of statutory reserves. The court discussed the circumstances of the previous case and highlighted that the Supreme Court had remanded the matter to the Commissioner (Appeals) for further consideration. However, in the present case, the Tribunal had already decided the issue in favor of the bank. The court concluded that based on the previous judgment and the interpretation of relevant provisions, both questions were decided in favor of the assessee. Consequently, the appeals were dismissed, upholding the decision in favor of the assessee based on the principles established in the previous judgments and the interpretation of the Income Tax Act.
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