1. By this reference under Section 256(1) of the I.T. Act, 1961 (hereinafter referred to as 'the Act'), the Income-tax Appellate Tribunal, Indore Bench, has referred the following questions of law to this court for its opinion :
'(1) Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income from commission and brokerage, subsidy from Government, admission fee, incidental charges, financial penalties and miscellaneous income is not exempted under the provisions of Section 80I(2)(a)(i) of the Income-tax Act, 1961
(2) Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessment in this case, for the assessment year 1974-75 was rightly reopened under Section 147(b) of the Income-tax Act, 1961 '
2. The material facts giving rise to this reference briefly are as follows :
The assessee, is a co-operative society, carrying on the business of banking and providing credit facilities to its members. The assessment years in question are 1974-75 to 1979-80. For the assessment year 1974-75 the assessment was completed on November 4, 1976. Subsequently, the ITO reopened the assessment under Section 147(b) of the Act, as he was of the opinion that the original order of assessment was erroneous as certain facts were overlooked. The assessee raised objection to the reopening of assessment and contended that reopening of assessment on account of change of opinion was not warranted by the provisions of Section 147(b) of the Act. The ITO rejected that objection and held that income from commission, brokerage, Government subsidy and incidental charges would not qualify for deduction under Section 80P of the Act. The ITO, therefore, completed the assessment and computed the income of the assessee at Rs. 43,370. Assessments for the five subsequent years were also framedon the same lines. The assessee preferred appeals before the AAC but the appeals were dismissed. On further appeal, the Tribunal upheld the finding of the AAC and held that the income derived by the assessee from commission, brokerage, subsidy from Government and other incidental charges was not attributable to banking business. In respect of assessment year 1974-75, the Tribunal held that the ITO was justified in reopening the assessment. Aggrieved by the order passed by the Tribunal, the assessee sought a reference and it is at the instance of the assessee that the aforesaid questions of law have been referred to this court for its opinion.
3. The answer to the first question depends upon the question as to whether the income from commission, brokerage, subsidy from Government, admission fee and incidental charges can be held to be income attributable to the business of banking carried on by the assessee. The Tribunal has referred to the provisions of Section 5 of the Banking Regulation Act, 1949, and held that the aforesaid income was derived from activities, which were outside the scope of 'banking', as defined by Section 5(b) of that Act. In our opinion, what is material for the purpose of Section 80P of the Act is whether the income, in respect of which deduction is claimed, is attributable to an activity, which is normally a part of the business of banking or business of providing credit facilities to its members by a co-operative society. Judged by this test, income earned by the assessee from commission and brokerage by dealing in bills of exchange, subsidy from Government, admission fee from members, incidental charges and financial penalties, is all attributable to the business of banking or providing credit facilities to its members and, hence, deductible under Section 80P of the Act.
4. As regards the second question, we had occasion to consider a similar question in Kamalchand v. ITO : 128ITR290(MP) , and relying on the decision of the Supreme Court in Indian & Eastern Newspaper Society v. CIT : 119ITR996(SC) , it was held that where an assessment was sought to be reopened by the ITO on the ground that his predecessor-in-office had committed an error in allowing certain deductions and that no fresh information had come into possession of the ITO, the assessment could not be reopened. We see no valid reason to take a view different from that taken in Kamalchand's case : 128ITR290(MP) . In our opinion, therefore, the Tribunal was not right in holding that the assessment for the assessment year 1974-75 was rightly reopened under Section 147(b) of the Act.
5. For all these reasons, our answers to the questions referred to this court are in the negative and against the Department. Parties shall bear their own costs of this reference.