A co-operative bank, carrying on business of banking, statutorily required to place a part of its fund in approved securities, income arising from such investment is deductible under section 80P .
Commissioner of Income-tax
Nawanshahar Central Co-operative Bank Ltd.
CIVIL APPEAL NOS. 2499 AND 2500 OF 2005
DECIDED ON 8-4- 2005
1. Delay condoned. Leave granted.
2. This Court has consistently held that investments made by a banking concern are part of the business of banking. The income arising from such investments would, therefore, be attributable to the business of bank falling under the head “Profits and gains of business” and thus deductible under section 80P(2)(a)(i) of the Income-tax Act, 1961. This has been so held in Bihar State Co-operative Bank Ltd. v. CIT  39 ITR 114 (SC), CIT v. Karnataka State Co-operative Apex Bank  251 ITR 1941 (SC) and CIT v. Ramanathapuram District Co-operative Central Bank Ltd.  255 ITR 4232 (SC).
3. The principle in these cases would also cover a situation where a Co-operative bank carrying on the business of banking is statutorily required to place a part of its funds in approved securities. The appeals are accordingly dismissed without costs.