2014 (3) TMI 890

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.... from Banking activity" and allowing deduction u/s 80P(2)(a)(i) in respect of income for the assessment year 2004-05 derived from the sale of Govt. Securities. (2) The CIT(A) erred in not appreciating the facts that' the provisions of section 80P(2)(a)(i) is available to a co-operative society carrying on the business of banking or, providing credit facilities to its members. (3) The CIT(A) erred in not appreciating the fact that the assessee has earned income on sale of Govt Securities and not interest or any income on Govt Securities so as to rely on the decisions of Hon'ble Supreme Court cited in his orders.  (4) The learned CIT (Appeals) erred in law and on facts in allowing the claim of deduction under section 80P to the ....

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....o perused the assessment order. It is an undisputed fact that the appellant has a valid license issued by the RBI for conducting banking business and as per the guidelines issued by the RBI an Urban Co-operative Bank is required to maintain investment in certain Government securities. That being so, any income derived from funds so placed arose from the business carried on by it and the assessee had not, by reason of section 80P(2)(a)(i), to pay income-tax thereon for A.Y.2004-05. The placement of such funds being imperative for purpose of carrying on the banking business, the income derived therefrom would be income from the assessee's business. It could not be accepted that only income derived from circulating or working capital would fal....

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.... banking business and as per the guidelines issued by the RBI an Urban Co-operative Bank is required to maintain investment in certain securities as per RBI guidelines that income derived from the funds was so placed arose from the business carried on by it. The placement of such funds being imperative for purpose of carrying on the banking business, the income derived therefrom would be income from the assessee's business. The Supreme Court has considered this issue in the case of CIT vs. Nawanshahar Central Co-operative Bank Ltd. 160 Taxman 48(SC) wherein it is held as under: "The assessee co-operative bank was required to place a part of its funds with the State Bank of the Reserve Bank of India to enable it to carry on its banking bu....