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Berhampur Co-operative Central Bank Ltd. Vs. Addl. Commissioner of Income-tax and anr. - Court Judgment

LegalCrystal Citation
SubjectDirect Taxation
CourtOrissa High Court
Decided On
Case NumberO.J.C. Nos. 315, 316, 317 and 318 of 1971
Judge
Reported in[1974]93ITR168(Orissa)
ActsIncome Tax Act, 1961 - Sections 80P and 80P(2)
AppellantBerhampur Co-operative Central Bank Ltd.
RespondentAddl. Commissioner of Income-tax and anr.
Appellant AdvocateY.S.N. Murthy, Adv.
Respondent AdvocateS.C. Roy, Adv. and ;Standing Counsel
Cases ReferredIn Syed Yakoob v. K.S. Radhakrishnan
Excerpt:
- motor vehicles act, 1988 [c.a. no. 59/1988]section 173(1) proviso; [d. biswas, amitava roy & i.a.ansari, jj] appeal without statutory deposit but within limitation/or extended period of limitation maintainability - held, if the provision of a statute speaks of entertainment of appeal, it denotes that the appeal cannot be admitted to consideration unless other requirements are complied with. the provision of sub-section (1) of section 173 permits filing of an appeal against an award within 90 days with a rider in the first proviso that such appeal filed cannot be entertained unless the statutory deposit is made. the period of limitation is applicable only to the filing of the appeal and not to the deposit to be made. it, therefore, appears that an appeal filed under section 173 cannot..........of law, namely :'it is clear that business income in the case of a co-operative society engaged in banking business is totally exempted from tax.'4. the petitioner does not claim exemption on the basis of providingcredit facilities to its members, but claims that since it carries on businessof banking and interest in the instant case on government securities isprofit attributable to the said activity of banking, such profit is to beexempted in toto in computing the income of the petitioner. the questionfor examination, therefore, is as to whether interest on governmentsecurities constitutes business income arising out of, and appertaining to,banking business of the petitioner.5. in support of the stand of the petitioner, reliance was placed on a decision of their lordships of the supreme.....
Judgment:

R.N. Misra, J.

1. The petitioner is a co-operative society registered under the Orissa Co-operative Societies Act and carries on the business of banking. It also provides credit facilities to its constituents. It came to be assessed under the Income-tax Act of 1961 (hereinafter referred to as 'the Act'), for the assessment years 1962-63, 1963-64, 1965-66 and 1966-67. The Income-tax Officer took up all the assessments at a time and by order dated January 27, 1967, made in respect of each of the assessment years directed interest accrued due on the securities held by the petitioner to be added to the income for the purposes of taxation. The petitioner did not pursue the remedy of appeal available under Section 246 of the Act, but filed a revision petition against each of the four assessments under Section 264(1) of the Act before the Commissioner of Income-tax, Orissa. Those revision petitions came,up for disposal before the Additional Commissioner of Income-tax, Orissa (opposite party No. 1). The Additional Commissioner declined to interfere with the decision of the Income-tax Officer. These four writ applications ask for a writ of certiorari to quash the order made by the Additional Commissioner of Income-tax upholding that part of the order of assessment of the Income-tax Officer for each of the years in question by which the claim for exemption raised by the petitioner has been disallowed. This judgment shall cover all the four applications.

2. The claim by the petitioner to relief is on the basis of the provisions of Section 80P of the Act. The relevant provision of that Sub-section is as follows:

'(1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in Sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this Section, the sums specified in Sub-section (2), in computing the total income of the assessee.

(2) The sums referred to in Sub-section (1) shall be the following, namely:--

(a) in the case of a co-operative society engaged in-

(i) carrying on the business of banking or providing credit facilities to its members, or ... the whole of the amount of profits and gains of business attributable to any one or more of such activities ;....'

3. There is no dispute that the petitioner is a co-operative society, nor is there any dispute that it carries on the business of banking and provides credit facilities to its members. The Additional Commissioner formulated the right basis of law, namely :

'It is clear that business income in the case of a co-operative society engaged in banking business is totally exempted from tax.'

4. The petitioner does not claim exemption on the basis of providingcredit facilities to its members, but claims that since it carries on businessof banking and interest in the instant case on Government securities isprofit attributable to the said activity of banking, such profit is to beexempted in toto in computing the income of the petitioner. The questionfor examination, therefore, is as to whether interest on Governmentsecurities constitutes business income arising out of, and appertaining to,banking business of the petitioner.

5. In support of the stand of the petitioner, reliance was placed on a decision of their Lordships of the Supreme Court in the case of Bihar State Cooperative Bank Ltd. v. Commissioner of Income-tax, [1960] 39 I.T.R. 114; [1960] 3 S.C.R. 58 (S.C.). Their Lordships were considering the claim of exemption under the notification of the Central Board of Revenue of 1934 and 1945. The question referred to the court was: 'Whether, in the facts and circumstances of the case, the receipt of interest on fixed deposits was an income under the head of 'Other sources' keeping in view the provisions of Section 12 of the 1922 Act?' The Additional Commissioner is, therefore, right in his analysis that the facts of the aforesaid decision were different from the facts in the present case. The matter was considered in the reported decision from a somewhat different angle. Yet, support is available from the ultimate conclusion reached in the case, namely, interest earned on fixed deposits was income from banking business in the hands of the bank. Interest on fixed deposits can certainly be equated with interest earned on Government securities.

6. The learned standing counsel for the revenue is right in his contention that the burden lay on the petitioner to establish its right to claim the exemption. The petitioner's stand was that the securities held by it were held for ensuring fluid assets for its business of banking and holding of Government securities and thus was an integral part of the business of banking. As we have already indicated, the petitioner does not claim exemption on the ground that the profits were earned while carrying on the activity of providing credit facilities to its members. If that was the case, positive evidence in support of such claim had to be produced as from the accounts maintained by the petitioner evidence of such fact could be available. The petitioner, however, has taken the stand that the investment in Government securities is not a capital investment, but is one integrally connected with its business of banking and those investments have been made to facilitate or ensure the carrying on of its business of banking smoothly. To meet such a case there may or may not be evidence in the accounts, the intention would be the basis, and that has been pleaded.

7. The Additional Commissisner in his order has said:

'The representative has submitted a list of transfer of securities between 1963 and 1965. But this shows that certain securities were redeemed only. There is no evidence, however, that the assessee has been engaged in purchase and sale of securities or that the securities constitute the stock-in-trade of the banking business.'

8. The fact that securities have been redeemed possibly justifies the stand of the assessee that holding of securities was connected with the business of banking. There does not appear to be any material to support the position that securities have been held as capital assets. On the other hand the fact that there have been frequent redemptions of such securities should have led to a different conclusion.

9. Learned standing counsel relied upon a decision of their Lordships of the Supreme Court in Commissioner of Income-tax v. Bombay State Co-operative Bank Ltd., [1968] 70 I.T.R. 26 (S.C.) Their Lordships were considering the claim of exemption under Notification No. FD. (C.R.) R. Dis. 291-I.T./25 dated August 25, 1925, issued under Section 60 of the Indian Income-tax Act of 1922. The terms of the notification were very different from the provision under Section 80P of the Act of 1961. We do not find much support to the stand of the learned standing counsel from the aforesaid decision for the purposes of the present case.

10. Ordinarily, banks do invest their moneys in Government securities. One of the purposes of such activity is to ensure availability of ready money to meet various exigencies of the banking trade. In such circumstances holding of Government securities would indeed be appropriately connected with the banking business and thus the matter would be covered by the first part of the provision contained in Section 80P(2)(a)(i) of the Act. The conclusion reached by the Additional Commissioner does not seem to be correct.

11. Learned standing counsel vehemently contended that it is not a fit case where we should assume jurisdiction for issuing a writ of certiorari. In support of his contention, he placed reliance on the decisions in Veerappa Pillai v. Roman and Raman Ltd., A.I.R. 1952 S.C. 192 Nagendra Nath Bora v. Commissioner of Hills Division, A.I.R. 1958 S.C. 398. Arunachalam Pillai v. Southern Roadways Ltd., A.I.R. 1960 S.C. 1191, Dastgir Saheb v. Union of India, A.I.R. 1964 Punj. 432 and Ahmed Hussain v. State of Travancore-Cochin, A.I.R. 1953 Trav.-Coch. 386. We do not find any direct support, keeping the facts of the case in view, from any of the decisions. The Additional Commissioner drew adverse inference against the assessee without any justification and the ultimate conclusion reached in the matter was not supported by the evidence on record. The error seems to have been the outcome of an erroneous approach in law.

12. In Syed Yakoob v. K.S. Radhakrishnan, A.I.R. 1964 S.C. 477, 480 it was laid down :

'Where it is manifest or clear that the conclusion of law recorded by an inferior court or Tribunal is based on an obvious misinterpretation of the relevant statutory provision, or sometimes in ignorance of it, or may be, even in disregard of it, or is expressly founded on reasons which are wrong in law, the said conclusion can be corrected by a writ of certiorari.'

13. The fact for determination here was a mixed question of fact and law and an erroneous conclusion was reached on account of a wrong approach in law. We would, accordingly, overrule the objection raised by the learned standing counsel and hold that the Additional Commissioner of Income-tax committed an error apparent on the record and reached a conclusion which is vitiated in law.

14. We would, therefore, allow the applications and direct that a writ of certiorari shall issue to quash the said orders. The claim laid for exemption under Section 80P of the Income-tax Act must be found to have been established. The orders of assessment shall accordingly be corrected. Wemake no order as to costs.

B.K. Ray, J.

I agree.


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