Assessing officer's order of charging peanl interest under section 234B is appelable.
One can not agree to the finding of the Commissioner (Appeals) in view of the decision of the Tribunal, Ahmedabad `A' Bench in the case of Vikshara Trading & Investment (P) Ltd. v. Dy. CIT (1998) 61 TTJ (Ahd.) 6. In this case, the assessee has completely denied its liability under section 234B, but the assessing officer charged interest. Thus, this order of the assessing officer was appealable and the Commissioner (Appeals) ought to have entertained the ground on charging of interest under section 234B. The Commissioner (Appeals) is accordingly, directed to entertain the ground and adjudicate upon the same afresh.
As per Banking Regulation Act Co-operative bank was required to invest 25 percent of total deposits in Government and trustee securities, income earned on such investment was income from banking activity of assessee and eligible for exemption.
The issue now stands squarely covered in favour of the assessee by the following judgments of the Hon'ble Supreme Court: (1) Madhya Pradesh Co-op. Bank Ltd.'s case (supra), (2) Bangalore Distt. Co-op. Central Bank Ltd.'s case (supra), (3) Vellore Electric Corpn. Ltd.'s case (supra) thoroughly discussed by this court in para 13 (supra).
Accordingly, this court revers the findings of the authorities below and hold that the entire income earned on ' banking in Government Securities is assessee's income from banking activities and is eligible for exemption under section 80P(2)(a)(i) of the Income Tax Act.
Deduction under s. 80P--CO-OPERATIVE SOCIETY DOING BANKING BUSINESS--Activity of bill collection whether incidental or conducive to promotion of banking business In terms of section 6(1) of the Banking Regulation, Act, 1949, activity of bill collection amounted to activity incidental or conducive to promotion of banking business and thus commission earned by bank will qualify for deduction.
Section 6(1) enumerates all such activities which a bank is required to undertake to exist and work as a bank and, therefore, the Act has permitted banks to carry on such activities as they are incidental and having proximate relationship with the business of banking. That is why section 6(2) specifically prohibits a banking company from engaging in any form of business other than those referred to in sub-section (1) of section 6. This means that the various businesses enumerated in section 6(1) are under specific authority of the Act conferred on the banks.
Particular reference may be made to section 6(1)(n) which permits banks of doing all such other things as are incidental or conducive to promotion or advancement of the business of the company. Therefore, the above clause (n), read with earlier clauses brings out the running live link between all those objects which activities are incidental or conducive to the promotion or advancement of the business of the company. This is very clear from the expression of "all such other things". Therefore, reading sections 6(1) and 6(2) with all their constituent parts harmoniously, it is very clear that all the activities mentioned therein which are authorised specifically by the Act are to enable the banking company to do all such acts which are incidental or conducive to the promotion or advancement of the business of banking. If so, the income earned from such other activities can really be considered as income attributable to the business of banking.
In this regard, it has to be noted that thus the activity of bill collections falling under section 6(1)(b) of the Banking Regulation Act, 1949 as per which a bank is permitted to act as agent for any Government or local authority or any other person or persons.
Deduction under s. 80P--COOPERATIVE SOCIETY DOING BANKING BUSINESS--Establishing the nexus of bill collection with banking business Bill collection activity undertaken by assessee cooperative bank under an agreement with MSEB having a current account with bank, was encouraging banking habit among rural public, thus bill collection activity was integral part of banking business, therefore, commission earned on bill collection deserves exemption.
The bill collection activity is not undertaken as a source of earning profit. In fact, the assessee has suffered a loss in that activity.
Service is being provided because it gives a facility to rural public who have no access otherwise to make the payments. When the persons come to the bank for payment of electricity bills, this indirectly helps in encouraging banking habit which is the intention of the Government all through. Through various legislations, the Government is encouraging directly or indirectly the habit of banking. There is another reason why the assessee bank carries on this activity. MSEB has a current account with the bank and if money is collected on behalf of the MSEB, it provides funds to the various rural branches of the bank.
Collections made by the branches are not remitted in cash, but they are remitted only by way of book entry, with the result that though the bank holds the money for and on behalf of the MSEB, the fund remains with the various branches. This becomes particularly useful in rural branches to whom the head office then need not transmit any money separately. In a sense, by collecting amount for MSEB what the assessee bank is really doing is collecting money of a current account holder.
This becomes an integral part of the business of banking. The commission earned in that behalf, therefore, becomes an integral part of business of banking only. If one considers the purposive intention of allowing exemption to the co-operative banking and one keeps in mind the purposes for which exemption is granted, it is clear that in the assessee bank's case allowing exemption for activity of bill collection of MSEB is one which deserves exemption.
The assessee is a co-operative society registered under the Maharashtra State Co-operative Societies Act. It is carrying on the business of banking. The first grievance of the assessee is that the learned Commissioner (Appeals) is not justified in confirming the addition of Rs. 34,36,044 being income estimated by the assessing officer from Maharashtra State Electricity Board (hereinafter referred to as `MSEB') bills collection commission by holding it, as not deductible non-banking business income under section 80P(2)(a)(i). During the year under appeal, the assessee-bank received gross commission at Rs. 43,35,000 from MSEB on account of bill collection from its customers.
The assessee pleaded before the assessing officer that this income was its banking income and hence fully deductible under section 80P(2)(a)(i). In support of its contention, the assessee placed reliance on the decision of the Jabalpur Bench in the case of ITO v.Sagar Co-op. Central Bank (1979) 1 Taxman 559 (Jab-Trib.) dated 10-1-1979 and the decision of the Pune Bench in the case of Ahmednagar Distt. Central Co-op. Bank Ltd. [IT Appeal No. 268 (Pune) of 1987 dated 6-4-1990] for assessment year 1982-83. The assessing officer was not satisfied with the submissions made by the assessee and held that the collection of bills on behalf of MSEB and hence earning of commission was not banking business of the assessee. He, however, allowed 1% as expenses for earning such commission and estimated the income at Rs. 34,36,044 which, according to the assessing officer, was taxable as non-banking business of the assessee.
The assessee appealed before the Commissioner (Appeals). The assessee explained the entire mode of collection of commission on behalf of the MSEB and reiterated that the case of the assessee was fully covered by the two decisions of two different Benches of the Tribunal (hereinafter referred to as `the ITAT') referred to supra The Commissioner (Appeals) noted that the Pune Bench had overruled its own decision in the case of Osmanabad Distt. Central Co-op. Bank Ltd. [IT Appeal Nos. 817 and 818 (Pune) dated 31-7-1984] and that the decision of the assessing officer was justified in the light of the judgment of the Hon'ble Supreme Court in the case of Madhya Pradesh Co-op. Bank Ltd- v. Addl. CIT (1996] 218 ITR 438 (SC).
The assessee is in appeal before us. Shri K.A. Sathe, the learned counsel for the assessee, submitted that the Pune Bench in the case of Ahmednagar Distt. Central Co-op. Bank Ltd- (supra) and the Jabalpur Bench in the case of Sagar Co-op. Central Bank (supra) have considered the provisions of section 80P(2)(a)(i). Both these decisions have duly considered the interpretation of section 6(1) of the-Banking Regulation Act, 1949 and the meaning of the words "in addition to the business of banking". They have duly noted the difference in the language of section 81 and section 80P(2)(a)(i). Whereas section 81 exempted income derived from banking, section 80P(2)(a)(i) allows deduction in respect of income attributable to the business of banking. This distinction in language has now been approved and recognised by the Supreme Court in the case of CIT v. Bangalore Distt. Co-op. Central Bank Ltd. (1998) 4 DTC 557 (SC) : (1998) 233 ITR 282 (SC). According to the learned counsel, in view of the latest decision of the Hon'ble Supreme Court, the point seems to be well-settled and as such, the law laid down in the two decisions of the Tribunal referred to supra is good law even today. The learned counsel further submitted that the reliance placed by the learned Commissioner (Appeals) on the earlier decision of the Supreme Court in the case of Madhya Pradesh Co-op. Bank Lid. (supra) is misplaced, as the decision in that case has to be confined to the facts of its own case, because it was in the context of section 81 and not in the context of section 80P(2)(a)(i).
Shri Hari Krishan, the learned senior departmental representative, strongly supported the orders of the authorities below. He submitted that originally the issue was decided in favour of the department by the Income Tax Appellate Tribunal, Pune Bench, in the case of Osmanabad Distt. Central Co-op. Bank Ltd. (supra). But while taking a contrary view in the case of Ahmednagar Distt.. Central Co-op. Bank Ltd. (supra), the Pune Bench has said that they would have followed its own judgment in the case of Osmanabad Distt. Central Co-op. Bank Ltd. (supra) if that was the only decision on that point. In Ahmednagar Distt. Central Co-op. Bank's case (supra) for holding that income from commission on bill collection for MSEB is eligible for deduction under section 80P, the first point considered by the Pune Bench was that the Madhya Pradesh High Court in the case of CIT v. Dhar Central Co-op.
Bank (1984) 149 ITR 438 (MP) had held that the income from commission, brokerage, government security, etc., should be regarded as income attributable to the business of banking. According to the learned Departmental Representative, the very starting presumption of the Pune Bench that in the case of Dhar Central Co-op. Bank (supra), the Madhya Pradesh High Court had held that income derived from commission, brokerage should be regarded as income attributable to the business of banking, is wrong. What has been actually held in this case is that commission from dealings in bills of exchange (and not any commission) is income from business of banking. The Hon'ble Madhya Pradesh High Court held that this income is attributable to the business of banking.
The learned Departmental Representative submitted that it may be noted that in second para on page 440 of this Report even the Madhya Pradesh High Court has taken a view "... in our opinion what is material for the purpose of section 80P of the Income Tax 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. . . ." So, according to the learned Departmental Representative, what has been actually considered by the Madhya Pradesh High Court was that the activity should be normally a part of the business of banking and the activity of dealings in bills of exchange is well known to be normally a part of the business of banking. He, therefore, submitted that the Pune Bench while deciding the case of Ahmednagar Distt. Central Co-op.
Bank Ltd. (supra) has misunderstood the judgment of the Madhya Pradesh High Court in the case of Dhar Central Co-op. Bank (supra) and has wrongly applied this judgment to the commission on collection of bills on behalf of MSEB which is an all together different source and is not at all a normal part of the business of banking.
According to the learned Departmental Representative, section 6(1) of the Banking Regulation Act, 1949 itself makes it very clear that the banking companies in addition to business of banking are permitted to engage in any one or more of the activities enumerated in clauses (a) to (o) of sub-section (1) of section 6. This itself means that the activities enumerated in clauses (a) to (o) of sub-section (1) of section 6 are in addition to the business of banking. The learned Departmental Representative pointed out that when the Income Tax Appellate Tribunal has said that the activity of commission on bills collection would fall in the activity enumerated in section 6(1), the Tribunal probably, without actually specifying was referring to the activity of collecting and transmitting of money enumerated at the end of clause (a) of section 6(1). He pointed out that immediately before this activity in this clause is included the activity of providing of safe deposit vaults, ie. lockers. The Pune Tribunal has, however, decided that income from the activity of providing safe deposits vaults ie. lockers is not income from the business of banking and as such, the same is not eligible for deduction under section 80P(2)(a)(i). He further submitted that in view of various submissions being made there was good and sufficient reason for the Hon'ble Tribunal . to change its opinion arrived at in the case of Ahmednagar Distt. Central Co-op. Bank Ltd (supra) which is directly contrary to its judgment on the issue of income from lockers and both these activities are placed one after the other in clause (a) of section 6(1) of the Banking Regulation Act, 1949. He submitted that if the Tribunal finds it difficult to change its decision, the case.requires to be referred to the Special Bench of the Tribunal. The learned Departmental Representative further submitted that one more reason canvassed for change of the opinion by the Tribunal in the case of Ahmednagar Distt. Central Co-op. Bank Ltd (supra) was that in respect of commission from bills collection activity, no judgment of any High Court was available whereas in respect of income from safe deposits vaults i. e. lockers, in the following judgments the High Court of Madhya Pradesh has taken a decision against the assessee: Bhopal Co-op. Central Bank v. CIT (1988) 169 ITR 573 (MP) (being followed by the Pune I.T.A.T.), CIT v. Jila Sahakari Kendriya Bank Maryadit (1997) 225 ITR 421 (MP) .
The learned Departmental Representative further drew our attention to the decision of Ahmedabad Bench in the case of Dy. CIT v. Gujarat State Co-op. Bank Ltd (1998) 66 ITD 386(hd-Trib) to which one of us (A.M.) was a party and submitted that the Ahmedabad Bench has also followed the view of the PuneTribunal . that locker hiring activity is only on account of the permissive clause of Banking Regulation Act and income was not eligible for deduction under section 80P.Referring to the contention of the learned counsel that the expression used in section 80P is"attributable to"which is wider than the expression "derived from", the leaned Departmental Representative pointed out that recently the Hon'ble Supreme Court in the case of Vellore Electric Corpn. Ltd. v. CIT (1997) 227 ITR 55 (SC), while explaining the judgment of the Madras High Court in the case of English Electric Co. of India Ltd v. CIT (1987) 168 ITR 513 (Mad), where the Madras High Court had followed the judgment of the Supreme Court in the case of Cambay Electric Supply Industrial Co. Ltd v. CIT (1978) 113 ITR 84 (SC) in which for the first time the Supreme Court has said that the expression "attributable to" was of wider import, has held at page 576/C of the Report that this decision indicates that in the case where the security deposit is necessary for the purpose of business of the assessee, then the interest obtained therefrom can be said to be attributable to the priority industry. On this page of the Report itself in para-F the Supreme Court goes on to say that the position that emerges from these decisions is that the profits and gains can be said to be attributable to the priority industry, if there is a direct and proximate connection between the business of the priority industry and the activity in question. Proceeding further in the judgment on page 557-D of the Report, the Supreme Court holds that what is required is that the activity from which the income was earned must have a direct and proximate connection with the priority industry. The learned Departmental Representative further submitted that while considering a similar issue the Supreme Court in the case of Madhya Pradesh Co-op.
Bank Ltd (supra), while interpreting section 81 of the Income Tax Act, has held that only the income from the activity which can be regarded as essential part of the banking activity would be exempt and it may be noted that in both sections 81 and 80P the expression "derived from" which is considered not to have wider import is not used, yet the Supreme Court has taken the above in the matter.
Going back to the decision of the Tribunal in the case of Ahmednagar Distt. Central Co-op. Bank Ltd. (supra), the learned Departmental Representative drew our attention to the observations of the Bench that the Supreme Court in Broach Distt. Co-op. Cotton Sales, Ginning & Pressing Society Ltd. [1989) 177 ITR 418 (SC) have held that the object of section 81 was to encourage and promote the growth of co-operative societies and as such the liberal consideration must be given to the operation of that provision. According to the learned Departmental Representative, as far as liberal interpretation is concerned, the Supreme Court in the case of CIT v. N.C. Budharaja & Co. (1993) 204 ITR 41 (SC) has recently held that liberal interpretation of incentive provisions is not to do violence to plain language of the section. He further submitted that in the case of Madhya Pradesh Co-op. Bank Ltd. (supra) at page 443, the Supreme Court has held that the purpose of section 81 was to encourage co-operative societies in the country and yet it was held that, however, if such a co-operative society also engages in any activity other than the business of banking the profits from, such business shall not be exempt. According to the learned Departmental Representative, the Hon'ble Gujarat High Court in the case of Surat Vankar Sahakari Sangh Ltd. v. CIT (1971) 79 ITR 722 (Guj) has held that in the matter of granting deduction under section 80P, a strict construction of the provision is necessary.
In the light of above submissions, the learned Departmental Representative concluded that the income from commission on bills collection from MSEB is neither co-related nor having any direct or proximate nexus with the definition of "banking" as given in section 5(b) of the Banking Regulation Act which reads . . . "banking'means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise." As a rejoinder, Shri K.A. Sathe, the learned counsel for the assessee, submitted that section 6 of the Banking Regulation Act, 1949, has to be read as a whole. Section 6(1) enumerates all such activities which a bank is required to undertake to exist and work as a bank and therefore, the Act has permitted banks to carry on such activities as they are incidental and having proximate relationship with the business of banking. That is why section 6(2) specifically prohibits a banking company from engaging in any form of business other than those referred to in sub-section (1) of section 6. This means that the various businesses enumerated in section 6(1) are under specific authority of the Act conferred on the Banks. The learned counsel made particular reference to section 6(1)(a) which permits banks of doing all such other things as are incidental or conducive to promotion or advancement of the business of the company. According to the learned counsel, the above clause (n), read with earlier clauses brings out the running live link between all those objects which activities are incidental or conducive to promotion or advancement of the business of the company.
This is very clear from the expression of "all such other things".
Coming to the case of Vellore Electric Corpn. Ltd. (supra) relied upon by the learned departmental representative, the learned counsel submitted that this is exactly how the Supreme Court applied the test of attributable and it is to be noted that Vellore Electric Corpn.
Ltd.'s case (supra) does not overrule Cambay Electric Supply Industrial Co. Ltd.'s case (supra) in any way. The learned counsel, therefore, maintained that the law laid down by the Pune Bench in the case of Ahmednagar Distt. Central Co-op. Bank Ltd.'s case (supra) and the Jabalpur Bench in the case of Sagar Coop. Central Bank (supra) is still good law.
We have considered the rival submissions and perused the facts on record. In order to claim exemption under section 80P(1), read with section 80P(2)(a)(i), what the assessee is required to prove is that the income in question is "attributable" to the business of banking.
Section 5(b) of the Banking Regulation Act, 1949, defines what the term "banking" means. It does not say that activities defined as "banking" were the only activities attributable to the business of banking.
Section 6(1) of the Banking Regulation Act, 1949 enumerates various activities which a banking company could carry on. In this regard, it has to be noted that the activity of bill collections falls under section 6(1)(b) of the Banking Regulation Act, 1949 under which a bank is permitted to act as agent for any government or local authority or any other person or persons. This activity is undertaken by the Apex Body, i.e. Maharashtra State Co-operative Bank under an agreement between the MSEB and it is on the directive of the Apex Bank that the assessee bank is undertaking the activity of bill collection. The bill collection activity is not undertaken as a source of earning profit. In fact, the assessee has suffered a loss in that activity (which is an alternate contention regarding computation of income in Ground No. 2).
Service is being provided because it gives a facility to rural public who have no access otherwise to make the payments. When the persons come to the bank for payment of electricity bills, this indirectly helps in encouraging banking habit which is the intention of the government all through. Through various legislations, such as section 40A(3), the government is encouraging directly or indirectly the habit of banking. There is another reason why the assessee bank carries on this activity. MSEB has a current account with the bank and if money is collected on behalf of the MSEB, it provides funds to the various rural branches of the bank. Collections made by the branches are not remitted in cash, but they are remitted only by way of book entry, with the result that though the bank holds the money for and on behalf of the MSEB, the fund remains with the various branches. This becomes particularly useful in rural branches to whom the head office then need not transmit any money separately. In a sense, by collecting amount for MSEB what the assessee bank is really doing is collecting money of a current account holder. This becomes an integral part of the business of banking. The commission earned in that behalf, therefore, becomes an integral part of business of banking only. If one considers the purposive intention of allowing exemption to the co-operative banking and one keeps in mind the purposes for which exemption is granted, it is clear that in the assessee bank's case allowing exemption for activity of bill collection of MSEB is one which deserves exemption. In that behalf, the decision of the Hon'ble Supreme Court in the case of Broach Distt. Co-op. Cotton Sales, Ginning & Pressing Society Ltd (supra) becomes very significant.
The Pune Bench in the case of Ahmednagar Distt. Central Co-op. Bank Ltd. (supra) and the Jabalpur Bench in the case of Sagar Co-op. Central Bank (supra) have considered the various provisions of section 80P(2)(a)(i). Both these decisions have duly considered the interpretation of section 6(1) and meaning of the words 'in addition to the business of banking'. They have duly noted the difference in the language of section 81. and section 80P(2)(a)(i). Whereas section 81 exempted income derived from banking, section 80P(2)(a)(i) allows deduction in respect of income attributable to the business of banking.
This distinction in language has now been approved and recognised by the Hon'ble Supreme Court in the case of Bangalore Distt. Co-op.
Central Bank Ltd. (supra). In view of this latest decision of the Supreme Court, the point seems to be well-settled. The earlier decision of the Supreme Court in the case of Madhya Pradesh Co-op. Bank Ltd. (supra) has to be confined to the facts of its own case, because it was in the context of section 81 and not in the context of section 80P(2)(a)(i). It is significant that the Pune Bench in the case of Ahmednagar Distt. Central Co-op. Bank Ltd (supra) was itself faced with the dilemma whether to follow an earlier decision against the assessee.
But the then Members resolved it by holding that in view of the subsequent decisions of the Supreme Court and of the Madhya Pradesh High Court, they had to change the view. Since the decision of the Pune Bench is a well considered decision which is relevant to section 80P(2)(a)(i) and also considers the provisions of section 5(b) and section 6 of Banking Regulation Act, 1949, the said decision does not require reconsideration and accordingly, we reject the request of the learned Departmental Representative to refer the case to the Special Bench. In the case of H.A. Shah & Co. (1956) 30 ITR 618 (sic), the Hon'ble Bombay High Court has considered the principle or res judicata in regard to the issues arising on facts, but there also the Hon'ble Judges have said that whenever the court is compelled to depart from the earlier view, it should be seen that no injustice is caused to the assessee.
Section 6 of the Banking Regulation Act, 1949 has to be read as a whole. Section 6(1) enumerates all such activities which a bank is required to undertake to exist and work as a bank and, therefore, the Act has permitted banks to carry on such activities as they are incidental and having proximate relationship with the business of banking. That is why section 6(2) specifically prohibits a banking company from engaging in any form of business other than those referred to in sub-section (1) of section 6. This means that the various businesses enumerated in section 6(1) are under specific authority of the Act conferred on the banks. Particular reference may be made to section 6(1)(n) which permits banks of doing all such other things as are incidental or conducive to promotion or advancement of the business of the company. Therefore, the above clause (n), read with earlier clauses brings out the running live link between all those objects which activities are incidental or conducive to the promotion or advancement of the business of the company. This is very clear from the expression of "all such other things". Therefore, reading sections 6(1) and 6(2) with all their constituent parts harmoniously, it is very clear that all the activities mentioned therein which are authorised specifically by the Act are to enable the banking company to do all such acts which are incidental or conducive to the promotion or advancement of the business of banking. If so, the income earned from such other activities can really be considered as income attributable to the business of banking.
Coming to the case of Vellore Electric Corpn. Ltd (supra) relied upon by the learned Departmental Representative, we find that it is exactly how the Supreme Court applied the test of attributable. It is also to be noted that Vellore's case does not overrule the case of Cambay Electric Supply Industrial Co. Ltd (supra) in any way. There, the Supreme Court was concerned with the creation of contingencies reserve and Development reserve and investment of the sums appropriated to the said reserve in securities authorised under the Indian Trusts Act.
Referring to this activity on page 577, the Supreme Court held that creation of this reserve and investment is a condition statutorily incorporated in the licence granted to the assessee and, therefore, incidental to the carrying on of the business of generation and distribution of electricity by the assessee. Sections 6(1) and 6(2) read together also provide a condition statutorily incorporated in the Banking Regulation Act which is to say, equivalent to licence granted to an electric company. If thus a condition of activity is something which has been statutorily incorporated in the Banking Regulation Act, on the same reasoning as appealed to the Hon'ble Supreme Court, the activities in section 6(1) have to be regarded as one which are incidental to the business of banking and the income therefrom has to be regarded as one attributable to the business of banking. Thus the decision in the case of Ahmednagar Distt. Central Co-op. Bank Ltd (supra) is a correct decision, even by applying the principles laid down by the Hon'ble Supreme Court in the case of Vellore Electric Corpn. Ltd. (supra).
Coming to the reliance placed by the learned CIT(Appeals) and by the learned Departmental Representative on the judgment of the Madhya Pradesh Co-op. Bank Ltd (supra), we are of the considered opinion that it is not relevant to the issue under consideration, as now has been brought out by the Supreme Court in the case of Bangalore Distt. Co-op.
Central Bank Ltd (supra). The decision of the Supreme Court in the case of Madhya Pradesh Co-op. Bank Ltd (supra) was in the context of old section 81 which was not in the context of the word 'attributable'.
What the Supreme Court has held in that case may be true in the context of section 81, but it looses its significance in view of the difference in the language of section 80P(2)(a)(i). The learned Departmental Representative's reference to page 447 whereunder the Supreme Court held that income derived from the investment in government securities cannot be regarded as essential part of banking activities was torn out of context. The decision has to be read as a whole and words here and there are not to be torn out of context to support the proposition.
Reference to such sentences on page 447 of the judgment of the Supreme Court has to be therefore confined to the facts of that case.
It is true that in the context of safe-deposit vaults, the Pune Bench in the case of Mahalaxmi Co-op. Bank Ltd. v. ITO (1987) 27 TTJ (Pune-Trib) 49 and the Ahmedabad Bench of the Tribunal in the case of Gujarat State Co-op. Bank Ltd (supra) to which one of us (A.M.) was a party-have followed the Madhya Pradesh High Court decision holding that income from safe-deposit vault is not attributable to the business of banking, but that, in our view, cannot be a reason for holding that the direct decision of the Pune Bench in the case of Ahmednagar Distt.
Central Co-op. Bank Ltd . (supra) requires reconsideration.
In the light of above discussion, we reverse the findings of the authorities below and hold that the commission income of Rs. 34,36,044 earned by the assessee bank from MSEB bills collection is banking business and hence exempt under section 80P(2)(a)(i). This ground accordingly succeeds.
Ground No. 2 has been raised as an alternative ground. It has been submitted that the learned Commissioner (Appeals) is not justified in not considering the submission and information about the expenditure incurred by the assessee bank on staff engaged on the bills collection activity on behalf of the MSEB. It has been submitted that the activity in fact runs in loss and the loss on this activity is about Rs. 9 lakhs and in the alternative this loss may be allowed against the other non-banking business income. Since the assessee has succeeded on the main ground and in ground No. 1 we have held that the entire income of commission from MSEB is exempt under section 80P(2)(a)(i), this ground looses its relevance and accordingly, we do not deem it fit to adjudicate upon this ground. This ground is accordingly dismissed as infructuous.
The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in confirming the income determined at Rs. 30,42,333 by the assessing officer (as income from government and trustee security) as non-banking business income and as such, not eligible for deduction under section 80P(2)(a)(i). As per the provisions of the Banking Regulation Act, 1949, the assessee bank has to observe certain ratio to maintain trust of the depositors. As such, the assessee bank has to invest 25 per cent of the total deposits in government and trustee securities. This ratio is called as 'SLR' (Statutory Liquidity Ratio). The assessing officer treated the income earned on these securities as the assessee's non-business income on the ground that the assessee bank was not involved in day-to-day sale purchase transactions in these securities.
On appeal, the Commissioner (Appeals) confirmed the action of the assessing officer.
We have heard both the parties. This issue now stands squarely covered in favour of the assessee by the following judgments of the Hon'ble Supreme Court: (2) Bangalore Distt. Co-op. Central Bank Ltd.'s case (supra), Accordingly, we reverse the findings of the authorities below and hold that the entire income earned on ' banking in government Securities is assessee's income from banking activities and is eligible for exemption under section 80P(2)(a)(i) of the Income Tax Act. This ground accordingly succeeds.
Ground No. 4 has been raised as an alternative ground. This ground reads as under: "Without prejudice to the above Ground No. 3 appellant submits that the income from government & trustee'securities to be held as non-banking income then expenses on earning such income say at 50 per cent or to a reasonable extent be allowed from this income." Since the assessee has succeeded on Ground No. 3, wherein we have held that the entire income earned on banking in Government securities is assessee's income from banking activities and is eligible for exemption under section 80P(2)(a)(i), this ground looses its relevance and accordingly, we do not deem it fit to adjudicate upon this ground. This ground is accordingly dismissed as infructuous.
The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in confirming the addition of Rs. 3,601 on account of compensation for use of guest-house and premises by holding it as non-banking business income. After hearing both the sides, we see no ground forinterference as the maintenance of guest-house is not an essential part of the activities of the assessee and hence income arising out of such activity has to be held as non-banking income. The assessee fails on this ground.
The next grievance of the assessee is that the learned Commissioner (Appeals) is not justified in confirming the addition of Rs. 4,921 on account of miscellaneous income and from sale of old newspapers, stationery charges, telephone recovery, etc. This issue stands squarely covered in favour of the assessee and against the revenue by the order of the Tribunal in the case of the assessee in ITA Nos. 314 to 317/PN/85, date 17-6-1987 relating to assessment years 1977-78 and 1979-80 to 1981-82. Following the ratio laid down in the aforesaid order, we direct the assessing officer to treat the amount of Rs. 4,921 as banking income of the assessee. This ground accordingly succeeds.
The last grievance of the assessee is that the learned Commissioner (Appeals) is not justified in not deciding and setting aside the issue regarding chargeability of penal interest levied at Rs. 17,58,024 under section 234B. The Commissioner (Appeals) in his order has observed that the issue of charging of interest under section 234B of the Act is not appealable. We do not agree to this finding of the Commissioner (Appeals) in view of the decision of the Tribunal, Ahmedabad `A' Bench in the case of Vikshara Trading & Investment (P) Ltd. v. Dy. CIT (1998) 5 DTC 735 (Ahd-Trib) : (1998) 61 TTJ (Ahd-Trib) 6 to which one of us (A.M.) was a party. In this case, the assessee has completely denied its liability under section 234B, but the assessing officer charged interest. Thus, this order of the assessing officer was appealable and the Commissioner (Appeals) ought to have entertained the ground on charging of interest under section 234B. The Commissioner (Appeals) is accordingly directed to entertain the ground and adjudicate upon the same afresh.