Madhya Pradesh H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income from commission, etc., at Rs. 38,722 and from locker rent at Rs. 5,681 earned by the assessee are not from carrying on the business of banking and, therefore, not entitled to exemption under s. 80P(2)(a)(i) of the IT Act, 1961?

High Court Of Madhya Pradesh

Bhopal Co-Operative Central Bank vs. CIT

Section 80P(2)

Asst. Year 1967-68, 1968-69, 1969-70, 1970-71, 1971-72, 1972-73, 1973-74

N.D. Ojha, C.J. & C.P.Sen, J.

Misc. Civil Case No. 556 of 1979

23rd June, 1987

Counsel Appeared

B.L. Nema, for the Assessee : B.K. Rawat, for the Revenue

N.D. OJHA, C.J.:

This judgment shall also govern the disposal of Misc. Civil Case No. 7 of 1980.

2. The following questions have been referred by the Tribunal, Indore Bench, Indore, to this Court for its opinion in each of these two miscellaneous cases, namely, MCC No. 556 of 1979 and MCC No.7 of 1980:

” (1) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income from commission, etc., at Rs. 38,722 and from locker rent at Rs. 5,681 earned by the assessee are not from carrying on the business of banking and, therefore, not entitled to exemption under s. 80P(2)(a)(i) of the IT Act, 1961?

(2) Whether, on the facts and in the circumstances of the case, the subsidy received by the assessee at Rs. 5,000 and credited in the books of accounts under the head ‘Donation and Financial assistance’ for meeting part of the expenditure of a new branch was not a receipt in the course of carrying on the business of banking and was, therefore, liable to be taxed as income and being not entitled for exemption under s. 80P(2)(a)(i) ? “

3. The assessee is M/s Bhopal Co-operative Central Bank, Bhopal, and the references have been made at the instance of the assessee. Misc. Civil Case No. 7 of 1980 is in respect of the asst. yrs. 1967-68 to 1973-74, whereas Misc. Civil Case No. 556 of 1979 is in respect of the asst. yr. 197475. MCC No. 556 of 1979 and MCC No. 7 of 1980 came up for hearing before a Division Bench of this Court on 19th Oct., 1982, and 8th July, 1983, respectively and on these dates the Tribunal was directed to submit a supplementary statement of the case. This direction has been complied with by the Tribunal.

From a perusal of the supplementary statement of the cases submitted by the Tribunal, it appears that income from commission and locker rent constituted income which is the subject-matter of question No. (1). In regard to the sources of commission, the Tribunal has pointed out in the supplementary statement that they constitute income from collections and dealings in bills of exchange, hundis, promissory notes, railway receipts, warrants and other instruments. In regard to subsidies which constitute the subject-matter of question No. (2), the Tribunal, in its supplementary statement, has stated that whenever the assessee-bank opened a new branch, the State Government during the first three years of such opening, subsidised part of the business expenditure by giving subsidy on ad hoc basis and such receipts were credited in the account styled as ” Subsidy and Donations “.

We have heard learned counsel for the parties. It has been urged by learned counsel for the assessee that the entire income which is the subject-matter of the two questions referred to this Court falls within the ambit of s. 80P(2)(a)(i) of the IT Act, 1961 (hereinafter referred to as “the Act “), which is quoted hereunder: ” 80P. (I) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-s. (2), there shall be deducted in accordance with and subject to the provisions of this section, the sums specified in sub-s. (2), in computing the total income of the assessee. (2) The sums referred to in sub-s. (1) shall be the following, namely:— (a) in the case of a co-operative society engaged in— (i) carrying on the business of banking or providing credit facilities to its members, or…… the whole of the amount of profits and gains of business attributable to any one or more of such activities :.. “

The scope of the expression “attributable to” came up for consideration before the Supreme Court in Cambay Electric Supply Indusrial Co. Ltd. vs. CIT 1978 CTR (SC) 50 : (1978) 113 ITR 84 (SC) : TC25R.306. It was held that the expression “attributable to” has a wider import than the expression “derived from” and would cover receipts from sources other than the actual conduct of the business of the specified industry. In CIT vs. Dhar Central Co-op. Bank (1984) 149 ITR 438 (MP), the scope of s. 80P(2)(a)(i) of the Act came up for consideration. It was held that the income earned by the assessee, a co-operative society carrying on the business of banking and providing credit facilities to its members, from commission and brokerage by dealing in bills of exchange, subsidy from Government, admission fee from members, incidental charges and financial penalties is attributable to the business of banking or providing credit facilities to its members and, hence, deductible under s. 80P(2)(a)(i) of the Act.

The Tribunal, in its appellate order, took the view that the income which was the subject-matter of the two questions did not fall under cl. (a) of s. 80P(2) nor did it fall under cl. (b) and consequently it was a case to which cl. (c) thereof was attracted and the assessee was entitled to the deduction contemplated by the said cl. (c). In view of the aforesaid two decisions, we are of opinion that the income which is the subject-matter of the two questions referred to us except income from locker rent is attributable to the business of banking or providing credit facilities to its members and hence liable to exemption under s. 80P(2)(a)(i) of the IT Act, 1961. Even while conceding wider import to the expression “attributable to” than the expression “derived from”, it is now to be found as to whether the income derived from locker rent could be attributable to the carrying on of the business of banking or providing credit facilities to its members. The term ” banking” has been defined in s. 5(b) of the Banking Regulation Act, 1949. According to this definition, “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, order or otherwise. Apparently, any income which may be derived in connection with any of the activities which falls within the definition of the term “banking” could alone be treated as income attributable to banking.

The income from locker rent, in our opinion, however, does not appear to be correlated to any of the activities which may fall within the definition of “banking” and, consequently, the view taken by the Tribunal, in its appellate order, in so far as the income from locker rent is concerned, seems to be correct, namely, that this income shall fall not under cl. (a) of s. 80P(2) of the Act but shall fall under cl. (c) thereof.

Our answer to the two questions referred to us, therefore, is that the income, which is the subject-matter of the two questions referred to us, except income from locker rent is attributable to the business of banking or providing credit facilities to its members and hence liable to exemption under s. 80P(2)(a)(i) of the IT Act, 1961, whereas the income from locker rent would not be liable to exemption under s. 80P(2)(a)(i) but to this income the provisions of s. 80P(2) of the Act would apply. The parties shall bear their own costs in each of these cases.

[Citation : 169 ITR 573]

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