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Judgment
Rule. The respondents waive service. By consent, rule is made returnable forthwith.
The petitioners challenge the notices u/s 148 of the Income Tax Act, 1961 (hereinafter referred to as the Act) for the assessment years 1990-91 to 1997-98. Notices were issued basically on two grounds : (i) that interest on investment. earmarked for reserve fund is not eligible for deduction u/s 80P(2)(a)(i) of the Act in view of the decision of the Supreme Court in M.P. Cooperative Bank Ltd., Jabalpur Vs. Addl. Commissioner of Income Tax, M.P. Bhopal, and (ii) income from commission, brokerage and other receipts is not eligible for deduction u/s 80P(2)(a)(i), The Additional Commissioner has approved the proposal in respect of the assessment years 1990-91 to 1995-96 only in regard to the first ground, i.e., deduction of interest on investment u/s 80P(2)(a)(i).
As far as the issue of interest on investment is concerned, the Supreme Court has now held in Commissioner of Income Tax Vs. KARNATAKA STATE CO-OPERATIVE APEX BANK, , that the society is entitled to deduction u/s 80P(2)(a)(i) in respect of interest earned from funds utilised for statutory reserves. Similar is the view taken by the Supreme Court in Mehsana District Central Co-operative Bank Ltd. Vs. Income Tax Officer, . In view of the above decisions, the issue of interest on statutory reserves does not survive, as the same stands concluded.
As far as the second reason is concerned, i.e., income from commission, brokerage and other receipts is not eligible for deduction u/s 80P(2)(a)(i), the Commissioner has not agreed with the assessing officer and restricted the approval only to the issue of deduction of interest on statutory reserves. Having regard to the fact that the Commissioner has refused approval on the said ground, we feel that there is no point in permitting the department to proceed with the notices. Accordingly, the impugned notices are quashed and set aside. Rule is made absolute in terms of prayer clauses (a) and (b). No order as to costs.