Assessee was an apex co-operative bank of Rajasthan deriving income from banking business. Income of assessee co-operative bank was exempt under section 80P(2) in all earlier year(s) . However, from assessment year in question i.e. 2007-08, entire income from banking business of assessee became taxable on withdrawal of exemption by insertion of section 80P(4) by Finance Act, 2006 with effect from 1-4-2007. AO treated the amount transferred to statutory reserve out of carried forward account of provision for expenses was treated as taxable under section 41(1). Tribunal and High Court up held the order of the AO. (AY. 2007-08)
Rajasthan State Co-Operative Bank Ltd. v. ACIT (2018) 100 taxmann.com 152 / 259 taxman 512 (Raj.)(HC) Editorial : SLP is granted to the assessee and stay of operation of the impugned judgement and order of the High Court , Rajasthan State Co-Operative Bank Ltd. v. ACIT (2018) 259 Taxman 511 (SC).
S. 41(1) : Profits chargeable to tax-Remission or cessation of trading liability–Banking business-Amount transferred to statutory reserve out of carried forward account of provision for expenses was treated as taxable. [S. 80P(2)]