1984 (2) TMI 75 - HC - Income Tax

High Court upholds Tribunal decision on bank's income exemption under section 80P.

The High Court upheld the Tribunal's decision, ruling in favor of the cooperative bank on both deduction claims for interest income from securities and ... Attributable To, Co-operative Society, Exemptions Issues involved: The judgment involves the assessment of deduction claims by a cooperative bank under section 80P of the Income Tax Act, 1961, for interest income from securities and subsidies received from the Government for the assessment years 1970-71, 1971-72, and 1973-74.Assessment of Deduction Claim for Interest Income from Securities:The Income Tax Officer (ITO) rejected the deduction claim by the assessee, a cooperative bank, stating that interest income from securities cannot be treated as income from banking business. However, the Income Tax Appellate Tribunal upheld the claim, citing relevant Supreme Court rulings and the provisions of section 80P(2)(a)(i) of the Act. The Tribunal reasoned that the interest income from securities is attributable to the banking business of the assessee, making it eligible for exemption under section 80P. The High Court concurred with the Tribunal's view, emphasizing that the interest income from securities is integral to the banking business operations and should be considered as income from banking business, thus entitling the assessee to the claimed exemption.Assessment of Deduction Claim for Subsidies Received:Regarding the claim for exemption on subsidies received from the Government, the Tribunal and the High Court found that the subsidies were given to the assessee as inducements for specific banking activities, making them attributable to the banking business. Citing precedents from the Allahabad High Court and the Bombay High Court, it was determined that the subsidies received by the assessee are directly related to its banking business and hence qualify for exemption under section 80P(2)(a)(i). The High Court ruled in favor of the assessee on both the deduction claims for interest income from securities and subsidies received, directing the Revenue to bear the costs of the assessee.Conclusion:The High Court upheld the Tribunal's decision, affirming that the interest income from securities and subsidies received by the cooperative bank are attributable to its banking business, thereby entitling the assessee to claim exemption under section 80P of the Income Tax Act, 1961. The judgment favored the cooperative bank on both deduction claims, emphasizing the direct link between the income sources and the banking activities of the assessee.