JUDGMENT
1. This is an income-tax reference under Section 256(1) of the Income-tax Act, 1961, at the instance of the Revenue and the Tribunal has referred the following four questions of law for answer by this court :
” (i) Whether, on the facts and in the circumstance’s of the case, the Tribunal is correct in law in holding that the income from locker rent at Rs. 9,496, Rs. 18,340, Rs. 17,310 and Rs. 20,116 for assessment years 1983-84, 1984-85, 1985-86 and 1986-87 are entitled to exemption under Section 80P of the Income-tax Act, 1961 ?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income from house rent at Rs. 4,239 and Rs. 11,007 for assessment years 1984-85 and 1985-86 are entitled to exemption under Section 80P of the Income-tax Act, 1961 ?
(iii) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income from miscellaneous receipts at Rs. 10,373, Rs. 6,984, Rs. 14,662 and Rs. 8,002 for assessment years 1983-84, 1984-85, 1985-86 and 1986-87 are entitled to exemption under Section 80P of the Income-tax Act, 1961 ?
(iv) Whether, on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the income from interest on securities earmarked to reserve fund and gratuity at Rs. 61,400, Rs. 52,775, Rs. 49,625 and Rs. 50,820 for assessment years 1983-84, 1984-85, 1985-86 and 1986-87 are entitled to exemption under Section 80P of the Income-tax Act, 1961 ?”
2. The assessee is a co-operative society primarily engaged in the banking business. The assessee filed returns claiming exemption under Section 80P of the Income-tax Act, 1961. The assessee had other sources of income which were not in the nature of banking. The Assessing Officer added income from other sources. Against the orders of the Income-tax Officer, the assessee went in appeal to the Deputy Commissioner of Income-tax (Appeals), who following the orders of the Tribunal dated May 6, 1986, in I. T. A. No. 219/(Nag) of 1982 for the assessment year 1977-78, dated February 6, 1987, in I. T. A. Nos. 761 to 763/(Nag) of 1984 and I. T. A. Nos. 975 and 976/(Nag) of 1985 for the assessment years 1978-79 to 1982-83, respectively, in the assessee’s own case, held that no part of the income was taxable, deleted the additions and allowed the assessee’s appeals. Aggrieved by the orders of the Deputy Commissioner of Income-tax (Appeals), the Department went in appeal to the Tribunal.
3. The Tribunal observed that the issue in controversy is covered by the decisions of the Tribunal and by the decisions of the High Court of Madhya Pradesh in CIT v. Dhar Central Co-operative Bank [1984] 149 ITR 438 ; CIT v. Bhopal Co-operative Central Bank Ltd. [1987] 164 ITR 713 ; CIT v. Bhopal Co-operative Central Bank Ltd. [1988] 172 ITR 423 and CWT v. Jambukumarsingh Kasliwal [1987] 166 ITR 623. The Tribunal following the aforesaid decisions of the Tribunal and of the High Court of Madhya Pradesh maintained the orders of the Deputy Commissioner of Income-tax (Appeals) and dismissed the departmental appeals. Against these orders, the Department approached the Tribunal for making reference to this court and, accordingly, the aforesaid four questions of law have been referred by the Department to this court for answer.
4. So far as the first question whether the Tribunal is correct in law in holding that the income from locker rent is entitled to exemption under Section 80P of the Act is concerned, it is directly answered by the judgment of this court in the case of Bhopal Co-operative Central Bank v. CIT [1988] 169 ITR 573. The Division Bench of this court in this case has taken the view (headnote) :
” However, the income derived from locker rent cannot be correlated to any of the activities which may fall within the definition of ‘banking’ and hence the same is not entitled to exemption under Section 80P(2)(a)(i) but will be governed by Section 80P(2)(c).”
5. Therefore, this question is accordingly answered in the light of the aforesaid judgment of the Division Bench of this court.
6. As regards the second question, whether the house rent is entitled to exemption under Section 80P of the Act, suffice it to say that under Section 80P of the Act, the amount of profits should be attributable to one of the activities enumerated in Section 80P(2)(a)(i) to (v) of the Act. We have examined these items. So far as the house rent is concerned, it does not fall in any of these clauses. Therefore, it cannot be said that the house rent is attributable to the banking activities and, therefore, exemption cannot be made available to the assessee. We, therefore, answer question No. 2 against the assessee and in favour of the Revenue.
7. Question No. (iii) relates to income from miscellaneous receipts. It is not known as to what is the nature of the receipts. According to the description which has been made by the Tribunal in its order, the receipts are attributable to the banking business. These receipts which are attributable to the banking business of the assessee are therefore entitled to exemption. There are concurrent findings of all the three courts below that the income from these receipts is attributable to the banking activity of the assessee. There is no reason to take a different view than the one taken by the three courts below in the matter. This is also supported by a decision of the Division Bench of this court in the case of CIT v. Dhar Central Co-operative Bank [1984] 149 ITR 438 where, in a normal situation, this question was answered in favour of the assessee and it was observed as under (at page 440) ;
“Judged by this test, income earned by the assessee from commission and brokerage by dealing in bills of exchange, subsidy from Government, admission fee from members, incidental charges and financial penalties, is all attributable to the business of banking or providing credit facilities to its members and, hence, deductible under Section 80P of the Act.”
8. Question No. (iii) is, therefore, answered against the Revenue and in favour of the assessee.
9. Question No. (iv) relates to income from interest on securities earmarked to reserve fund and gratuity and whether such incomes are entitled to exemption under Section 80P of the Act. This question has been directly answered in the decision in the case of M.P. Co-operative Bank Ltd. v. Addl. CIT [19961 218 ITR 438 (SC), wherein their Lordships of the Supreme Court have interpreted Section 81 (now Section 80P) of the Act and held that such securities are not part of the business of banking and, therefore, the exemption cannot be given. Their Lordships of the Supreme Court observed thus (headnote) :
” The object of Section 81 of the Income-tax Act, 1961, is to encourage the co-operative movement in the country by providing tax exemption to those co-operatives engaged in activities set out in Clauses (a) to (f) thereof. One such activity is the carrying on of the business of banking or providing credit facilities to its members by a co-operative society. The section therefore, provides that income-tax shall not be payable by a cooperative society in respect of the profits and gains of business carried on by it, if it arises from the business of banking or providing credit facilities for its members. However, if such a co-operative society also engages itself in activities other than the business of banking or providing credit facilities the profits derived from such business shall not be exempt from tax if it exceeds rupees fifteen thousand. It is, therefore, obvious that the entire income derived by a co-operative society from the business of banking or providing credit facilities to its members is exempt from income-tax, but if that society also engages itself in any other activity and earns profit therefrom, the income so derived becomes liable to assessment and payment of income-tax if it exceeds the ceiling amount. The normal banking activity is to receive deposits and utilise such deposits by advancing loans, etc., to borrowers. Since the rate at which interest is paid to depositors is lower than the rate charged from borrowers, the difference in the rates generated income for the banks. The banks may have to maintain certain reserves to meet emergencies, e.g., a spurt in withdrawals by depositors for diverse reasons. Investments which permit withdrawals at short notice would, therefore, be a part of the requirement of banking business and interest accruing on such investments would be outside the tax net.”
10. It is also observed (headnote) :
” Hence, the interest on Government securities placed with the State Bank of India or the Reserve Bank of India, could not qualify for exemption under Section 81 (now Section 80P) of the Income-tax Act. ”
11. Since this question has been directly answered by the Supreme Court that the interest on Government securities is not entitled to exemption, we answer question No. (iv) against the assessee and in favour of the Revenue. However, Shri Shriva’stava, learned counsel for the assessee, has submitted that the decision given in the case of Madhya Pradesh Cooperative Bank Ltd. v. Addl. CIT [1996] 218 ITR 438 has not taken into consideration the expression “activity through the banking business”. Learned counsel invited our attention to the cases reported in CIT v. P. K. Jhaveri [1990] 181 ITR 79 (SC) and Distributors (Baroda) P. Ltd. v. Union of India [1985] 155 ITR 120 (SC) and submitted that some of the judgments are of constitutional Bench. True, the expression “attributable to the banking business” has not been directly discussed, but none the less their Lordships of the Supreme Court have discussed the scope of Section 80P and it is not for this court to say or comment about the aforesaid decision as that is the latest judgment in point of time. We are of the opinion that the judgments cited by Shri Shrivastava, learned counsel for the assessee, do not provide any assistance for answering this reference.
12. In the result, we answer question No. (i) accordingly, as stated above ; question No. (ii) is answered against the assessee and in favour of the Revenue ; question No. (iii) is answered in favour of the assessee and against the Revenue ; and question No. (iv) is answered in favour of the Revenue and against the assessee. Reference is answered accordingly.