R.K.AGRAWAL, RAM SURAT RAM, JJ. - (1.) WE have heard Shri Dhananjay Awasthi for the Income Tax Department. Shri Ashok Trivedi appears for the respondent assessee.
(2.) IN this income tax appeal under Section 260 -A of the Income Tax Act, 1961 (in short the Act) the Commissioner of Income Tax, Muzaffar Nagar has raised the following questions of law to be considered by the Court: - "(1) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that interest earned by the assessee which is a Co -operative Bank on the deposits of its non -SLR funds is income from Banking Business and consequently exempt u/s 80 -P (2) (a) (i) of the I.T. Act, 1961? (2) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that interest earned on deposits of its non -SLR funds are also covered within the meaning of Section 80 -P(2)(a) (i) of the Act? (3) Whether on the facts and in the circumstances of the case, the Tribunal is justified in law in holding that interest on Non -SLR investment is exempt u/s 80 -P (2) (a) (i) ignoring that the definition of financing Bank or Central Bank in U.P. Co - operative Society Act does not refer to Section 5 or 6 of Banking Regulation Act and restrict banking business to only members of the co -operative societies of the assessee's bank?" Shri Dhananjaya Awasthi states that so far as Statutory Liquidity Ratio (SLR) Funds are concerned, the Supreme Court has held in Commissioner of Income Tax v. Karnataka State Cooperative Apex Bank, 251 ITR 194; Mehsana District Central Cooperative Bank Ltd. v. Income Tax Officer, 251 ITR 522; and Commissioner of Income Tax v. Nawanshahar Central Cooperative Bank Ltd., 289 ITR 6 (SC) that the cooperative bank carrying on business of banking is statutorily required to place a part of its funds in approved securities. The income as interest from such deposits of SLR Funds in the approved security, is an income, which is attributable to the business of bank and is deductible under Section 80 P (2) (a) (i) of the Act. He submits that so far as non - Statutory Liquidity Ratio (SLR) Funds are concerned, the interest arising out of deposits of such excess funds kept in short term securities would not be subject to deduction under Section 80P (2) (a) (i) of the Act. He submits that the question whether interest on the deposit of non -SLR funds are concerned, in Mehsana District Central Cooperative Bank Ltd. v. Income Tax Officer, 2001 (251) ITR 522, the Apex Court remanded the matter to the Commissioner (Appeals) for deciding the matter afresh. The short judgment of the Supreme Court is quoted as below: - "Civil Appeals Nos. 7448 and 7449 of 2000 : The only question in these appeals reads thus : "Whether, in the facts and circumstances of the case, the Income -tax Appellate Tribunal was right in law in holding that the assessee Ss not eligible for deduction under Section 80P in respect of interest income on its total reserve, and in holding so, ignoring its own decision as also the judgments of the Rajasthan High Court and the Supreme Court ?" In so far as the interest income upon statutory reserves is concerned, the question must be answered in favour of the assessee, in the light of the judgment delivered by us in CIT v. Karntilaka Stain Co -operative Apex Bank (2001) 251 ITR 194 (Civil Appeals Nos. 46464648 of 2000) As far as the interest income on non -statutory reserves is concerned, the matter is remanded to the Commissioner (Appeals) for being decided afresh in the light of the decision that we have just rendered in Civil Appeals Nos. 292 -298 of 2001. Accordingly, the civil appeals are allowed and the judgment under appeal is set aside. No order as to costs."
(3.) SHRI Dhananjaya Awasthi submits that this Court considered the question regarding the interest earned by the cooperative bank on deposits of its non -SLR funds, qualifying for deduction under Section 80P (2) (a) (i) of the Act in Income Tax Appeal No.83 of 2007, CIT v. District Cooperative Bank Ltd. decided on 6.1.2000. All these judgments relate to SLR funds. So far as non -SLR funds are concerned, the question may be decided by this Court. He submits that the Court may refer the judgment in CIT v. District Cooperative Bank Ltd., Income Tax Appeal No.83 of 2007 decided on 6.1.2010 to Larger Bench.;