Punjab & Haryana H.C : The interest on refund of income-tax paid in excess was not attributable to the income derived from the business of banking within the meaning of s. 80P(2)(a)(i)

High Court Of Punjab & Haryana

CIT vs. Haryana State Co-Operative Apex Bank Ltd.

Section 80P(2)(a)(i)

Asst. Year 2006-07

M.M. Kumar & Jitendra Chauhan, JJ.

IT Appeal No. 62 of 2010

15th February, 2010

Counsel Appeared :

Yogesh Putney, for the Appellant

JUDGMENT

M.M. Kumar, J. :

This instant appeal by the Revenue has been preferred under s. 260A of the IT Act, 1961, (for brevity “the Act”) challenging the order dt. 26th June, 2009, passed by the Income-tax Appellate Tribunal, Chandigarh Bench (for brevity “the Tribunal”) in ITA No. 555/Chd/2009 for the asst. yr. 2006-07. The Tribunal while upholding the order of the CIT(A) has reached the conclusion that the assessee-respondent, which is a co-operative apex bank, cannot be subjected to income-tax in respect of the interest received by it on the refund of excess income-tax paid. It has further been found that the assessee-respondent would be entitled to deduction under s. 80P(2)(a)(i) of the Act. The Tribunal has also placed reliance on a judgment of the Madras High Court in the case of CIT vs. Madurai District Co-operative Bank Ltd. (1999) 156 CTR (Mad) 348 : (1999) 239 ITR 700 (Mad). It has come on record that the respondent bank has been carrying on business of banking and also providing credit facility to its members. We are not impressed with the argument that the interest on refund of income-tax paid in excess was not attributable to the income derived from the business of banking within the meaning of s. 80P(2)(a)(i) of the Act. Once the income-tax paid was derived from the business income then interest income would partake of the character of the principal amount because the interest paid to the assessee-respondent is compensation on account of deprivation of the use of money.

2. In view of the above, we do not find any merit in the appeal. The order passed by the Tribunal does not suffer from any legal infirmity, warranting interference of this Court. The appeal is accordingly dismissed.

[Citation : 322 ITR 404]

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