Law:

Section:

Section 80P of the Income-tax Act, 1961 - Deductions - Income of Co-operative societies - Assessment yeas 1966-67 to 1968-69 - Whether one of most important factors which would help in distinguishing whether Government securities and debentures or fixed deposits held by bank are in nature of investments or are part of stock-in-trade is whether such securities or debentures are easily realisable or not - Held, yes - Whether merely because idle or surplus funds laid by bank are in nature of securities or debentures payable at certain specified period or that there was no variation in them would not convert them into investments - Held, yes - Whether, where Tribunal had found as fact that Government securities and municipal debentures held by assessee co-operative bank were easily realisable, they could not be treated as otherwise than as stock-in-trade - Held, yes Circulars and notification - Circular letter F. No. (108)-62/TPL dated 3-11-1962 issued by CBDT and Circular dated 9-11-1967 issued by CBDT FACTS The assessee was a co-operative bank carrying on general banking business. For the assessment years in question the ITO while computing chargeable income allowed proportionate interest on investment, viz., Government securities and municipal debentures in accordance with the Board's instructions contained in Circular letter F. No. (108)-62/TPL dated 3-11-1962. The Additional Commissioner, under section 263, held that the Government securities and municipal debentures were held as part of the investment of the co-operative society and were not in the nature of stock-in-trade and for purposes of reaching this conclusion, he relied on the fact that the investment figures stood at more or less identical figures and were in the range from Rs. 37 to 38 lakhs for all these three years. The Additional Commissioner also held that in accordance with section 20 (1)(ii) deduction on account of interest on burrowed money is admissible on an amount which bears to the amount of total interest payable on all moneys borrowed by the bank, the same proportion as the gross receipts from interest on securities bears to the gross receipts from all the sources which are included in…

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