2010 (1) TMI 175

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.... on deposits of its non-SLR funds qualify for deduction under section 80P(2) (a) (i) of the Income-tax Act 1961? 3. The assessee is a regional rural bank set up under the provisions of the Regional Rural Banks Act, 1976. This bank is declared to be a co-operative society for the purpose of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). For the assessment year under consideration, the assessee filed the return of income on July 31, 2001, and claimed the deduction of its entire income amounting to Rs. 65,86 under section 80P(2) (a) (i) of the Act. The return was accepted under section 143(1) (a) of the Act. Subsequently, a notice under section 148 of the Act was issued and the case was reopened with the view to disallow t....

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....gment was overruled by the apex court in the case of CIT v. Karnataka State Co-operative Apex Bank [2001] 251 ITR 194, where it was held that interest arising from investment made in compliance with the statutory provisions to enable it carry on banking business out of reserve funds by a co-operative society engaged in banking business was exempt under section 80P(2) (a) (i) of the Act. In the case of CIT v. Bangalore District Co-operative Central Bank Ltd. reported in [1998] 233 ITR 282 (SC), the hon'ble apex court held that interest on Government securities and dividends of shares of the Industrial Finance Corporation was income from banking business and hence entitled to deduction under section 80P(2)(a)(i) of the Act. In the case of Meh....

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....Upadhyay, learned standing counsel. 8. We are of the opinion that the issue involved in the present case is no more res integra and is covered by the decisions of the apex court in the case of CIT v. Karnataka State Co-operative Apex Bank reported in [2001] 251 ITR 194 (SC), Mehsana District Central Co-operative Bank Ltd. v. ITO reported in [2001] 251 ITR 522 (SC) and a recent decision of the apex court in the case of CIT v. Nawanshahar Central Co-operative Bank Ltd. reported in [2007] 289 ITR 6 (SC) wherein in it has been held that where a co-operative bank carrying on business of banking is statutorily required to place a part of its funds in approved securities, the income is attributable thereto is the business of banking and is dedu....