Telangana High Court
Commissioner Of Income Tax Iii ... vs A.P.State Co.Operative Bank Ltd. ... on 14 September, 2022
Bench: Ujjal Bhuyan, C.V. Bhaskar Reddy
THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
AND
THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY
I.T.T.A.Nos.236 & 263 of 2003
COMMON JUDGMENT: (Per the Hon'ble the Chief Justice Ujjal Bhuyan)
This order will dispose of both I.T.T.A.Nos.236 of 2003
and 263 of 2003.
2. I.T.T.A.No. 236 of 2003 pertains to assessment year 1995-96
whereas I.T.T.A.No.263 of 2003 relates to assessment year 1994-
95. Both these appeals have been preferred by the revenue against
the order dated 25.09.2001 passed by the Income Tax Appellate
Tribunal, Hyderabad Bench 'A', Hyderabad in I.T.A.Nos.117 &
118/Hyd/1999.
3. We have heard Mr. B.Narsimha Sarma, learned counsel for
the appellant (revenue) and Mr. Challa Gunaranjan, learned counsel
for the respondent-assessee.
4. In both the appeals, the following substantial question of law
has been proposed:
Whether on the facts and in the circumstances of the case,
assessee is entitled to claim exemption under
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Section 80(P)(2)(a)(i) of the Income Tax Act, 1961 in respect of
income derived from investments made by way of voluntary
reserves ?
5. This issue is no longer res integra as the same has been
conclusively decided by the Supreme Court in CIT v. Karnataka
State Cooperative Apex Bank1. The same question was framed
by the Supreme Court in the above decision. Supreme Court held
as follows:
The question is whether we agree with the reasoning in M.P.
Cooperative Bank Ltd v. CIT2. There is no doubt, and it is
not disputed that the assessee Cooperative Bank is required to
place a part of its funds with State Bank or Reserve Bank of
India to enable it to carry on its banking business. This being so,
any income derived from funds so placed arises from the
business carried on by it and the assessee has not by reason of
Section 80-P(2)(a)(i), to pay income tax thereon. The placement
of such funds being imperative for the purposes of carrying on
the banking business, the income derived therefrom would be
income from the assessee's business. We are unable to take the
view that found favour with the Bench that decided the case of
M.P. Cooperative Bank Ltd v. CIT that only income derived
from circulating of working capital would fall within Section 80-
(2001) 7 SCC 654 = 251 ITR 194
(1996) 2 SCC 541
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P(2)(a)(i). There is nothing in the phraseology of that provision
which makes it applicable only to income derived from working
or circulating capital.
6. In the light of the above, the question framed is answered in
favour of the respondent-assessee and against the appellant-
revenue. Consequently, order of the Income Tax Appellate
Tribunal, Hyderabad Bench 'A', Hyderabad dated 25.09.2001
passed in ITA.Nos.117/Hyd/1999 for the assessment year 1994-95
and ITA.No.118/Hyd/1999 for the assessment year 1996-97 is
affirmed.
7. The writ appeals are accordingly dismissed. No costs.
As a sequel, miscellaneous petitions, pending if any, stand
dismissed.
__________________
UJJAL BHUYAN, CJ
_______________________
C.V.BHASKAR REDDY, J
Date: 14.09.2022
LUR
