1981 (2) TMI 141

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....aimed the income as exempt under s. 80P. The ITO accepted the claim of the assessee and, accordingly, the assessee was assessed at Nil income. The CIT on perusal of the order of the ITO dt. 9th March, 1978 under s. 143(3) the asst. yr. 1975-76, found that the orders passed by the ITO, were prejudicial to the interest of revenue. He came to this conclusion on the ground that the assessee bank is a cooperative bank engaged in banking business. The assessee made investments in Government securities and derived an income of Rs. 26,094 which was claimed to be an income exempt under s. 80P to which the CIT Allahabad did not agree. The CIT accordingly, issued a show cause notice to the assessee and the assessee filed a written statement dt. 30th J....

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.... of the provisions of s. 80P (2)(a)(i) unless and until the assessee establishes that the income sought to be exempted was earned in carrying on the business of banking or providing credit facilities to its members, its claim to exemption must be rejected. Significantly no evidence has been led to show that the assessee was under obligation to lay apart any fixed proportional amount for investment in Government Securities or that such investment was in terms of any rules by which the assessee was under obligation or compulsion to do so. In the absence of such conditions or obligations the income derived would be taxable and not exempt as claimed. 11. The record is explicit of the fact that in the instant case the assessee's income from i....

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.... yr. 1974-75 and the order of the Tribunal in ITA No. 1759 (All) of 1972-73 for the asst. yr. 1969-70 in the case of the Allahabad District Co-operative Bank Ltd. vs. ITO, On the basis of these two orders, the counsel of the assessee stated that the matter had already been concluded by the Supreme Court in (1960) 39 ITR 114 (SC) and (1968) 70 ITR 86 (SC). The Tribunal had also taken the same view in the case of the assessee for the asst. yr. 1974-75. The income from interest is the business income of the assessee which carries on banking business within the meaning of Banking Regulation Act, 1949. Under the above circumstances, the CIT had no material to come to the conclusion that the order passed by the ITO under s. 143(3) dt. 9th March, ....