1. Since these two appeals involve common contentions, they are disposed of by a common order for the sake of convenience.
2. The appellant is Saraswat Co-operative Bank Ltd. It carries on banking business with its registered office at Girgaum and branches at Dadar, Goregaon, Chembur, Juhu, Khetwadi, Ghatkopar and Sadashiv Cross Lane. These appeals relate to its income-tax assessments for the assessment years 1980-81 and 1981-82.
3. For the first year 1980-81, for which the previous year ended on 30-6-1979, the appellant-bank filed its return of income declaring an income of Rs. 2,780. The ITO found that the appellant-bank derived income from banking business, rent from house property and dividend income from shares. For the first time, the appellant claimed in the course of the assessment proceedings that the rental income of Rs. 19,990 from the house property would be exempt under Section 80P(2)(e) of the Income-tax Act, 1961 ('the Act') The ITO did not accept this claim, as he was of the view that the income from house property was not derived as a result of any activity, as envisaged by Section 80P(2)(c). He, accordingly, rejected the assessee's claim for exemption of this income of Rs. 19,990 from tax.
4. In the next year 1981-82, for the previous year ended on 30-6-1980, the appellant had declared a total income of Rs. 2,780 in its return of income filed on 29-4-1981. It had claimed in the return that income amounting to Rs. 34,05,417 was exempt from tax under Section 80P(2)(a), (c) and (d). The ITO observed that the appellant derived income from banking business and other sources, that out of the assessee's claim for exemption under Section 80P(2), the appellant was not entitled to exemption in respect of the property income amounting to Rs. 20,949 under Section 80P(2)(c) for the reasons given in the assessment order for the earlier assessment year. He, accordingly, brought to charge the said income.
5. The appellant took up the matter in appeal and contended that it was entitled to exemption under Section 80P(2)(c) in respect of this income also, even though it was derived from house properties. It was contended before the Commissioner (Appeals) that the acquisition of properties and receipt of rental income therefrom by the appellant should be considered as part of its business activities and that the appellant would be entitled to the deduction of Rs. 20,000. Reliance was placed on the decision of the Supreme Court in the case of CIT v.Calcutta National Bank Ltd.  37 ITR 171.
6. The Commissioner (Appeals) held that the decision of the Supreme Court, relied on by the appellant, turned on the provisions of the Excess Profits Tax Act, 1940, wherein it was held that the definition of 'business' under the Excess Profits Tax Act was wider than the definition under the Income-tax Act. He pointed out that under Section 80P(2)(e), income derived from renting of godowns or warehouses was exempted, that if the intention was to grant exemption in respect of rental income from other properties, it could have been so specified and that it could not be said that the appellant was engaged in any activity in respect of earning rental income from properties. In these circumstances, the Commissioner (Appeals) held that Section 80P(2)(c) (which is wrongly mentioned as (e) in the Commissioner's ' order) did not appear to be applicable to the appellant's case. He, therefore, confirmed both the assessments and dismissed the appeals. The appellant feels aggrieved by these orders of the Commissioner (Appeals) and has come up in appeal to the Tribunal.
7. Shri D.Y. Pandit, the learned counsel for the appellant, submitted before us that the appellant's claim for exemption in respect of the property income in question in both the years was based on the main provisions contained in Section 80P(2)(a)(i) itself, as the appellant was a co-operative society engaged in carrying on the business of banking as specified in the said provision of law. He next submitted that the appellant's claim for exemption under Section 80P(2)(c) was only by way of an alternative claim. Shri Pandit placed before us a copy of the bye-laws of the Saraswat Co-operative Bank Ltd., the appellant herein, as also copies of the statements disclosing the particulars of the property income filed under the head 'Income from house property' for both the assessment years along with the appellant's returns of income. The learned counsel pointed out that the appellant owned six buildings in the first year and eight buildings in the second year, that all these buildings were acquired by the appellant-bank mainly for the purpose of carrying on its banking business and that only in four of the buildings, viz., those situated at Girgaum, Dadar, Juhu and Khetwadi, the appellant-bank was deriving income from rent from the tenants, who were in occupation of portions of these properties. According to the learned counsel, these properties were let out to these tenants even prior to the acquisition of these properties by the appellant-bank, that these tenants continued to remain in the properties even after the acquisition of the properties by the Bank, since they were protected by the Bombay Rent Control Act, and that the rental income received by the appellant-bank formed part and parcel of the income of the appellant in the normal course of carrying on its banking business, even though the said rental income had to be computed in accordance with the provisions of the Act under a separate head for the purposes of assessment. The learned counsel further submitted that under Section 70 of the Maharashtra Co-operative Societies Act, 1960, a co-operative society was to invest or deposit its funds in accordance with the said provisions of law and that under Rules 54 and 55 of the Maharashtra Cooperative Societies Act, 1960, a co-operative society can invest its reserve funds or other funds in any immovable property specified by the Registrar by a general or a special order and that the co-operative society was prohibited from investing in any immovable property without the prior sanction of the Registrar of Co-operative Societies. The learned counsel also relied on Clause 5(a) and (e)(xvi) of the objects clause of its bye-laws, and pointed out that the acquisition of all these properties had been made by the appellant-bank in accordance with these provisions of its bye-laws and the provisions of the Maharashtra Co-operative Societies Act and the Rules thereunder. The learned counsel argued that in view of the prohibition contained against a co-operative society investing in any immovable property without the prior sanction of the Registrar, it would be clear that all these properties have been acquired by the appellant-bank only for the purpose of carrying on its banking business with such prior permission of the Registrar of Co-operative Societies and that the deriving of rental income from the already existing tenants of these properties was only incidental to and part of the banking business carried on by the appellant-bank. Shri Pandit argued that under Rule 54(l)(iv), a co-operative society can invest in any immovable properties specified by the Registrar by a general or special order and that the Explanation to Rule 55(1) showed that any investment made by the societies in an immovable property with the prior sanction of the Registrar in buildings for its own use, was also considered as for the purpose of the business of the co-operative society for that purposes of that sub-rule. Shri Pandit also placed before us copies of the orders of the Divisional Joint Registrar, Co-operative Societies, dated 11-9-1979 and 24-10-1979, granting sanction to the appellant-bank to invest an amount of Rs. 20 lakhs from its reserve fund for the purchase of a building at Navneet Bhavan, Girgaum, Bombay-4, as an illustrative example in support of the appellant's case. The learned counsel, therefore, argued that the rental income derived by the appellant-bank formed part of the business income of the appellant-bank in the normal course of carrying on its banking business, that the fact that the rental income from this property has to be computed under the specific provisions contained in the Income-tax Act would not alter or affect the true nature and character of this income as the business income of the appellant-firm and that, therefore, the appellant would be entitled to exemption under the main provisions of Section 80P(2).
Alternatively, the appellant would be entitled to exemption under Section 80P(2)(c), as claimed before the departmental authorities. In support of these submissions, Shri Pandit relied on the following decisionsCIT v. Cocanada Radhaswami Bank Ltd.  57 1TR 306 (SC), CIT v. Universal Radiators (P.) Ltd.  128 ITR 531 (Mad.), Shardlow India Ltd. v. CIT  128 ITR 571 (Mad.) and Cambay Electric Supply Industrial Co. Ltd. v. CIT  113 ITR 84 (SC).
8. Shri C.K. Vohra, the learned departmental representative, placed before us a copy of the letter dated 2-5-1980 filed by the appellant's counsel before the ITO in the course of the assessment proceedings for the assessment year 1980-81 and submitted that the appellant's claim for exemption has throughout been only under Section 80P(2)(c) and that this was the only point to be decided in the present appeals. He argued that the appellant's present claim for exemption under Section 80P(2)(c) was entirely a new case set up for the first time before the Tribunal and it was necessary for deciding this issue to know whether the properties in question were acquired for the purpose of the banking business of the appellant-bank, as claimed by it. Shri Vohra argued that there was no material before the lower authorities to decide this issue and that, therefore, we should not allow the appellant to take up this plea for the first time before the Tribunal. In support of his contentions, Shri Vohra relied on the grounds of appeal filed by the appellant before the Commissioner (Appeals) in both the years and also relied on the decision of the Supreme Court in Addl. CIT v.Gurjargravures (P.) Ltd.  111 ITR 1 to argue that the appellant was precluded from taking up this plea. He also relied on the findings of the departmental authorities and contended that there was no material to presume that the rental income received by the assessee from its tenants formed part of the banking business carried on by it and that the appellant's claim for exemption under Section 80P(2)(c) was also rightly rejected by the departmental authorities.
9. The assessee's learned counsel in his reply relied on the decision of the Supreme Court in CIT v. Mahalakshmi Textile Mills Ltd.  66 ITR 710, and contended that the appellant was entitled to put forward a plea for exemption under a different provision of law and that this was not a new case that was being set up for the first time. He further pleaded that no further facts were necessary to be gone into for the purpose of deciding this claim of the appellant in both the years.
10. We have carefully considered the submissions urged on both sides in the light of the materials and authorities relied on by the learned counsel.
11. In our view, the appellant is entitled to succeed on its main contention that it is entitled to exemption in respect of the property income in question in both the years under Section 80P(2)(a)(i), as the appellant co-operative society is engaged in carrying on the business of banking as specified in the said provision of law. We are unable to agree with the revenue that the appellant should not be allowed to raise this plea for the first time before the Tribunal. It will be seen that the appellant had been claiming exemption in respect of the property income before the departmental authorities in both the years, no doubt under Section 80P(2)(c). At the same time, 'the appellant had also mentioned that it was a banking company in the co-operative sector, that during the course of its business it had acquired buildings, that the part of these buildings, which were not required for business, was let out on rental basis to the tenants and that realisation of such rental income became the source of the business income to the assessee. This would be clear from the letter dated 2-5-1980 written by the appellant's counsel, enclosing the return for the assessment year 1980-81. Thus, the present claim of the assessee is only for exemption not merely under Section 80P(2)(c) but also under Section 80P(2)(a)(i). The decision of the Supreme Court in the case of Mahalakshmi Textile Mills Ltd. (supra) fully supports such a contention being raised by the assessee. At page 713 of the report, their Lordships of the Supreme Court have pointed out that there is nothing in the Income-tax Act which restricts the Tribunal to the determination of the questions raised before the departmental authorities, that all questions whether of law or of fact which relate to the assessment of the assessee may be raised before the Tribunal, that if for reasons recorded by the departmental authorities in rejecting a contention raised by the assessee, grant of relief to him on another ground is justified, it would be open to the departmental authorities and the Tribunal, and indeed they would be under a duty, to grant that relief and that the right of the assessee to relief is not restricted to the plea raised by him. We are, therefore, unable to agree with the objections of the revenue to the entertainment of this plea raised by the assessee before us.
12. As the name of the assessee itself indicates, it is a co-operative society carrying on business of banking. This position is also accepted by the revenue, as could be seen from the assessment orders for both the years where it is specifically mentioned by the ITO that the appellant derives income from banking business. The further question for our consideration is whether the property income derived by the assessee also forms part of its business income. Bye-law 5 of the appellant-bank specifies the objects of the society, for which it is formed. Bye-law 5(a) reads as follows: (a) To do banking business on co-operative principles by accepting for the purpose of lending or investment, of deposits of money from members as well as the public, repayable on demand or otherwise and, withdraw able by cheque, draft, order or otherwise.
5(e). To engage in any one or more of the following forms of business namely : (XVI) The acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the society, with the previous permission of the Registrar ; The learned counsel has also placed before us Section 70 of the Maharashtra Co-operative Societies Act, which provides for the investment of funds by a co-operative society. Section 70(e) enables a cooperative society to invest its funds in any other mode permitted by rules or by general or special order of the State Government. Rules 54 and 55 enable a co-operative society to invest its funds in any immovable property specified by the Registrar by a general or a special order. The learned counsel has also placed before us a copy of the order, dated 11-9-1979, issued by the Divisional Joint Registrar of Co-operative Societies, allowing the appellant-bank to invest Rs. 20 lakhs from its reserve fund to purchase the building at Navneet Bhavan at Girgaum. We are only referring to this just to show that there is substance in the contentions of the counsel for the assessee that there are restrictions on the appellant-bank in investing in immovable property except for the purpose of carrying on its banking business with the permission of the Registrar of Co-operative Societies. Thus, it is clear from a reading of the bye-laws quoted above as well as the order of the Registrar of Cooperative Societies that the acquisition of the immovable properties by the appellant-bank was only for the purpose of the appellant-bank carrying on its banking business. This would also be clear from the statement of income filed along with the returns for these two years. For example, the break up of Rs. 2,85,241.76 shown as gross income from building in the profit & loss account for the year ended on 30-6-1979 shows that Rs. 1,12,726.88 represented the rent notionally charged for premises used by the bank for its own business in its head office and five branches. As against this, the rental income received from the tenants in four of the properties at Girgaum, Dadar, Juhu and Khetwadi amounts to Rs. 37,892.28 only. The balance of Rs. 1,34,622.60 represents the interest on building fund investment, Thus, it will be clear that a major portion of the buildings acquired by the appellant-bank is being utilised only for the purposes of its banking business, viz., for the location of its branches at various places or offices, as the case may be. The letting out of a portion of some of these buildings in the four places mentioned above is only incidental to the carrying on of its banking business. In fact, the learned counsel for the appellant stated before us that these tenants were there even before these properties were acquired by the appellant-bank and that, therefore, the appellant had to continue these tenants who could not be evicted, since they were protected by the Bombay Rent Control Act. We do not see any reason to disbelieve this statement made on behalf of the appellant-bank.
13. It may be that for the purposes of computing the income from property, this rental income would be assessable under Sections 22 and 23 of the Act. But it does not mean that this income ceases to be the business income of the appellant-bank, since the business of the appellant is essentially banking and not that of a builder or a real estate owner who builds properties and lets them out on rent. As mentioned already, the letting of the property and the receipt of the rental income is incidental to the carrying on of the banking business by the appellant cooperative society.
14. In Cocanada Radhaswami Bank Lid's case (supra), the Supreme Court held that the scheme of the Income-tax Act is that income-tax is one tax, that Section 6 of the Indian Income-tax Act, 1922 ('the 1922 Act'), corresponding to Section 14 of the 1961 Act, classifies the taxable income under different heads for the purposes of computation of net income of the assessee and that though for the purposes of computation of the income, interest on securities is separately classified, income by way of interest from securities does not cease to be part of income from business if the securities are part of the trading assets. Their Lordships held that whether a particular income is part of the income from a business falls to be decided not on the basis of the provisions of Section 6 but on commercial principles.
Their Lordships have explained their earlier decisions in United Commercial Bank Ltd. v. CIT  32 ITR 688 (SC) and East India Housing & Land Development Trust Ltd. v. CIT  42 ITR 49 (SC) and applied the ratio of their decision in CIT v. Chugandas & Co.  55 ITR 17 (SC).
15. In Bihar State Co-operative Bank Ltd. v. CIT  39 ITR 114, the Supreme Court held that as the appellant was a bank and one of its objects was to carry on the general business of banking, its normal business was to deal in money and credit and did not consist only of receiving deposits and lending money to its members or other societies.
Their Lordships further held that it was a normal mode of carrying on banking business to invest monies in such a manner that they are readily available, that the monies laid out in the form of deposits did not cease to be part of the appellant's circulating capital and that the interest from the deposits arose from the business of the bank and was exempt from income-tax under the notifications and nothing turned on the manner in which the appellant chose to show this income in its return. Their Lordships further held that the various heads under Section 6 were mutually exclusive.
16. When we examine the facts of the present case, in the light of the two decisions of the Supreme Court referred to above, it would be clear that the investments made by the appellant-bank in the purchase of these properties was also part and parcel of its banking business as specified in bye-law (5)(e)(xvi) quoted above. Otherwise, the appellant-bank is prohibited from investing its funds in immovable property as we have shown above with reference to the provisions of the Maharashtra Co-operative Societies Act and the Rules made thereunder.
It, therefore, follows that the rental income derived by the appellant-bank from portions of some of these buildings acquired by it for the purpose of its banking business also forms part of its business income only though for the purpose of computation of its total income under the Act, the said income has to be computed separately as income under the head 'Income from house property' in accordance with Sections 22 to 27.
17.. We may, in this connection, also refer to the provisions of the Banking Regulation Act, 1949 (X of 1949). This Act is also made applicable to co-operative banks as could be seen by the insertion of Section 56 in Part V of the said Act by the Banking Laws (Application to Co-operative Societies) Act (XXIII of 1965), with effect form 1-3-1966. Section 6 in Part II of this Act specifies forms of business, in which banking companies may engage. Section 6(1)(k) is relevant for our purpose and it reads as follows : 6. Forms of business in which banking companies may engage. - (1) In addition to the business of banking, a banking company may engage in any one or more of the following forms of business, namely :(a) to (j) ** ** ** (k) the acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purposes of the company ; It will be noticed that bye-law 5(e)(xvi) of the appellant-bank substantially conforms to this provision of law in the Banking Regulation Act also. It can hardly be disputed that the appellant-bank is also subject to the provisions of this Act in addition to the Maharashtra Co-operative Societies Act, relied on by the appellant's learned counsel. We, therefore, respectfully follow the two decisions of the Supreme Court referred to above and hold that the bank is entitled to the exemption in respect of its property income under Section 80P(2)(a)(i), 18. Even the alternative submission of the appellant for exemption under Section 80P(2)(c) has to be accepted. It cannot be disputed that the income of Rs. 19,990 in 1980-81 and of Rs. 20,949 in 1981-82 is income attributable to such activities other than those specified in Clause (a) or Clause (b) of Section 80P(2). The learned counsel is right in his submission that the words employed in Section 80P(2)(c), viz., 'profits and gains attributable to such activities' are wider in their scope than 'income derived by the co-operative society from the letting of godowns or warehouses for storage', etc., in Section 80P(2)(e), relied on by the Commissioner (Appeals). This is now well settled by the decision of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd. (supra). The two decisions of the Madras High Court relied on by the learned counsel for the asses-see in Universal Radiators (P.) Ltd.'s case (supra) and Shardlow India Ltd.'s case (supra) follow the same principles laid down by the Supreme Court in the decision referred to above. We, therefore, hold that the appellant would be entitled to the exemption to the extent allowed by Section 80P(2)(c) also, if it is to be held that it is not entitled to the exemption claimed by it under Section 80P(2)(a)(i).