2005 (8) TMI 28 - SCH - Income Tax

Banking Entities' Investments Qualify for Tax Deduction Under Section 80-P, Affirming Core Business Income Exemption

The SC ruled that investments by banking entities constitute part of their core banking business. Income derived from such investments qualifies for tax ... Special deduction - Assessee-cooperative society carrying on business of banking statutorily required to place a part of its funds in approved securities, the income attributable thereto is deductible u/s 80P(2) The Supreme Court of India, in this order, reaffirmed the principle that investments made by a banking concern are integral to the business of banking. Consequently, income from such investments is 'attributable to the business of bank' and taxable under the head 'Profits and Gains of business,' making it deductible under Section 80-P(2)(a)(i) of the Income Tax Act, 1961. This position aligns with precedents including Bihar State Cooperative Bank Ltd. v. CIT [1960] 39 ITR 114 (SC), CIT v. Karnataka State Cooperative Apex Bank [2001] Supp. (2) SCR 35, and CIT v. Ramanathapuram District Cooperative Central Bank Ltd. [2002] 255 ITR 423 (SC). The Court extended this principle to cooperative banks statutorily required to invest part of their funds in approved securities. The appeals were dismissed accordingly, with delay condoned and leave granted.