AI Drafter 
TaxTMI 
TaxTMI 
2014 (3) TMI 1251
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....re filing of return u/s. 139(1) of the Act and provision for bad and doubtful debts. For this, assessee has raised following grounds no. 1 to 7: "1. For that on the facts of the case, the order passed by the Ld. C.I.T.(A) is completely arbitrary, unjustified and illegal. 2. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in not allowing provision for gratuity amounting to Rs. 50,00,000/- which is completely arbitrary, unjustified and illegal. 3. For that on the facts of the case, Ld. C.I.T.(A) was wrong in not considering the fact that the gratuity amounting to Rs. 50,00,000/- was paid before filing the return of income u/s. 139(1), therefore, the order passed by the Ld. C.I.T.(A) is completely arbitrary, unjustified and illegal. 4. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in not allowing provision for leave encashment amounting to Rs. 20,00,000/- which is completely arbitrary, unjustified and illegal. 5. For that on the facts of the case, the Ld. C.I.T.(A) was wrong in not considering the fact that the tripartite agreement was entered into within the financial year, therefore, the Ld. ....
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.... deduction u/s. 80P of the Act in respect of receipts of interest on non-SLR funds For this, revenue has raised following grounds: "1. On the facts and circumstances of the case, the Ld. CIT (A) has erred in ignoring the aims and objectives enshrined in the Preamble of the RRB Act, 1976, in terms of the principle laid down in Keshavanand Bhartis case. 2. On the facts and circumstances of the case, the Ld. CIT (A) has erred in not taking cognizance of the fact that the assessee, a creation of RRB Act, in view of violation of section 3(1) of the RRB Act cannot be granted tax benefits u/s. 80P(2)(a)(i) on the plea that Regulatory Bodies have not acted against it which would be contrary to the principle laid down in Bihari LaI Jaiswal & Ors 217 ITR 746 (SC). 3. On the facts and circumstances of the case Ld. CIT (A) has erred in not considering the prime issue that public policy laid down by the Parliament cannot be overlooked and tax benefits be granted, despite objection of the Revenue, on the ground that regulatory body has not taken any action against the assessee for its violation. 4. On the facts and circumstances of the case Ld. CIT (A) has err....
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....td. (2013) 214 Taxman 498 (All) relying on the decision of Hon'ble Supreme Court in the case of Bihar State Cooperative Bank Ltd. Vs. CIT (1960) 39 ITR 114 (SC) and of Hon'ble Bombay High Court in the case of CIT Vs. Goa Urban Cooperative Bank Ltd., (Tax Appeal Nos. 6 & 8 of 2005, and in Tax Appeal No. 54 of 2008, decided on 15.07.2009) have held that interest earned out of deposits of surplus fund and interest earned on SLR or non-SLR funds will qualify for deduction u/s. 80P(2)(a)(i) of the Act. The relevant paras 8, 9 and 10 reads as under: "8. The Supreme Court in Bihar State Co-operative Bank Ltd. (supra) explained in para 12 and 13 that the interest earned out of deposits of surplus fund has to be treated as interest earned in the banking business. Paras 11, 12 and 13 of the judgment are qu as below: "11. In the Surat Peoples' Co-operative Bank Ltd v+ The Commissioner of Income-tax, Ahmedabad (2) the profit arose during the course of banking business out of the sale of Government securities which formed part of the stock-in-trade and as it was a co-operative bank the profits made from such sales were held to be exempt from taxation unde....
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....cision in this case. but it has not been shown that the moneys which were in deposit with other banks were surplus within that bye-law so as to take it out of banking business. As we have pointed out above, it is a normal mode of carrying on banking business to invest moneys in a manner that they are readily available and that is just as much a part of the mode of conducting a Bank's business as receiving deposits or lending moneys or discounting hundies or issuing demand drafts. That is how the circulating capital is employed and that is the normal course of business of a bank. The moneys laid out in the form of deposits as in the instant case would not cease to be a part of the circulating capital of the appellant nor would they cease to form part of its banking business. The returns flowing from them would form part of its profits from its business. In a commercial sense the directors of the company owe it to the bank to make investments which earn them interest instead of letting moneys lie idle. It cannot be said that the funds of the Bank which were not lent to borrowers but were laid out in the form of deposits in another bank to add to the profits instead of lying idle ....
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....oples Co-operative Bank Ltd. MANU/GJ/0493/2005 : (2006) 280 ITR 282 followed the principle while referring to the Special Bench Judgment of the Ahmedabad High Court in the case of Surat District Co-operative Bank Ltd. case MANU/IB/5017/2002 : (2003) 262 ITR (AT) I and held as under: In this case, it was held by the Special Bench of the Tribunal that the interest income on investment in Government securities, fixed deposits, KVPs and IVPs. investments with the Unit Trust of India, etc., out of surplus/idle money available from working capital including voluntary reserves, excess collection of interest-tax and locker rent are all income attributable to business of banking and are eligible for grant of deduction Under Section 80P(2)(a)(i) of the Act. Respectfully following the decision of the Special Bench of the Tribunal, we allow the appeal of the assessee. In the result, the appeal filed by the assessee is allowed." 3. The learned Counsel appearing for the Department has relied upon the Judgment of the Division Bench of the Bombay High Court in the case of C.I.T. v. Ratnagiri District Central Co-operative Bank Ltd. MANU/MH/0578/2001 : (2002) Vol. 254 Inco....