Commissioner Of Income Tax vs Maharashtra State Co-Operative ...
2005 Latest Caselaw 996 Bom

JUDGMENT

V.C. Daga, J.

1. Heard the learned Counsel for the applicant. This is application under Section 256(2) of the IT Act, 1961 ('the Act' for short). The year relevant is 1992-93. The returns filed by the respondent were processed under Section 143(1)(a) and the claim of the respondent in respect of deduction under Section 80P(2)(a)(i) was allowed.

2. The AO, subsequent to the above decision, having noticed the judgment of the apex Court in the case of Madhya Pradesh Co-op. Bank Ltd. v. Addl. CIT , issued a notice under Section 148 to the respondent-assessee which was served on the respondent-assessee on 16th Jan., 1997.

3. The reassessment pursuant to above notice was completed under Section 143(3) r/w Section 148 on 21st Feb., 1997. The deduction under Section 80P(2)(a)(i) claimed by the assessee with respect to interest received on Government securities earmarked against statutory reserve fund came to be disallowed.

4. The respondent-assessee had impugned the above order of reassessment passed by the AO in appeal filed before the CIT(A). The CIT(A) directed the AO to restrict the disallowance only to interest relatable to Government securities which forms part of reserve fund.

5. The respondent-assessee not being satisfied with the above part of the order, impugned the order passed by the CIT(A) in, the appeal being appeal No. 7115/Mum/1997 filed before the Tribunal, Mumbai Bench 'D', Mumbai.

6. The Tribunal by its order dt. 12th Aug., 1998, allowed the above appeal holding that Rule 54(1) of the Maharashtra Co-operative Societies Rules, does not apply in the case of the respondent as the assessee is covered under Section 70(b) of the Maharashtra Co-operative Societies Act, 1960. The Tribunal held that the respondent-assessee is not within the scope of Rule 54(2) of the Maharashtra Cooperative Societies Rules. The Tribunal held that the reassessment is invalid because notice under Section 148 of the Act was issued beyond time prescribed under Section 148 of the Act.

7. The Revenue not being satisfied with the above order of the Tribunal had moved an application under Section 256(1) of the IT Act with a prayer to refer question of law for the opinion of this Court. This prayer of the Revenue met with little success.

8. The Revenue has now moved this application under Section 256(2) with a prayer that the Tribunal be directed to state the case and refer the question of law arising out of the order of the Tribunal dt. 12th Aug., 1998, to this Court for decision. That is how, the Revenue is seeking directions against Tribunal. The questions of law raised at the instance of the Revenue are as under :

1. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the interest on Government securities earmarked for statutory reserve fund was a part of banking business and accordingly the assessee is eligible for deduction under Section 80P(2)(a)(i) of the IT Act, 1961 ?

2. Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling levy of interest under Section 234B of the IT Act, 1961 ?

9. The learned Counsel appearing for the Revenue fairly brought to our notice that the judgment of the apex Court in the case of CIT v. Karnataka State Cooperative Apex Bank (2001) 251 ITR 194 (SC), wherein the apex Court held that interest arising from investment made in compliance with statutory provisions to enable it to carry on banking business, out of reserve fund by a co-operative society engaged in banking business, is exempt under Section 80P(2)(a)(i) of the Act. In this view of the judgment of the apex Court, we do not see any reason to issue directions to the Tribunal to set out the case. The application is without any merits. So far as the second question is concerned it being consequential, the same will be covered by the judgment of the apex Court.

10. Application stands disposed of accordingly with no order as to costs.