Commnr of Income Tax, Jalandhar vs Nawanshahar Central Coop. Bank Ltd.

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2005 Supreme(SC) 1666

SUPREME COURT OF INDIA
Ruma Pal, C.K. Thakker, JJ.
Commnr of Income Tax, Jalandhar - Appellant
Versus
Nawanshahar Central Coop. Bank Ltd. - Respondent
Civil Appeal No. 2499 of 2005 (Arising out of SLP(C)No.3826 of 2004)
Decided On : 08-04-2005

Important Points

Income arising from investments made by a banking concern is deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961 as it is considered part of the business of banking.

Subject

Taxation Law - Income Tax Deductibility

Act Referred

INCOME TAX ACT : S.80(p)(2)(a)(i)

Headnote

Income Tax Act 1961 - Banking Investments - Deductibility under Section 80-P (2)(a)(i)

Fact of the Case:

The court held that investments made by a banking concern are part of the business of banking and the income arising from such investments is deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961.

Finding of the Court:

The court analyzed previous cases and concluded that investments made by a banking concern are attributable to the business of banking and thus deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961.

Issues: Interpretation of the deductibility of income from banking investments under Section 80-P (2)(a)(i) of the Income Tax Act 1961.

Ratio Decidendi: The court relied on previous cases to establish that income arising from investments made by a banking concern is part of the business of banking and is deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961.

Final Decision: The appeals were dismissed without costs based on the principle that investments made by a banking concern are part of the business of banking and the income arising from such investments is deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961.

ORDER :

Ruma Pal, J.

Delay condoned.

2. Leave granted.

3. This Court has consistently held that investments made by a banking concern are part of the business of banking. The income arising from such investments would, therefore, be attributable to the business of bank falling under the head "Profits and Gains of business" and thus deductible under Section 80-P (2)(a)(i) of the Income Tax Act 1961. This has been so held in Bihar State Cooperative Bank Ltd. v. Commissioner of Income Tax (39 ITR 114), Commissioner of Income Tax, Karnataka-III v. Karnataka State Cooperative Apex Bank (2001 Supp. (2) SCR 35, Commissioner of Income Tax v. Ramanathapuram District Cooperative Central Bank Ltd. (2002 (255) ITR 77.

4. The principle in these cases would also cover a situation where a cooperative bank carrying on the business of banking is statutorily required to place a part of its funds in approved securities. The appeals are accordingly dismissed without costs.