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[2007] 292 ITR 205 (ALL.) HIGH COURT OF ALLAHABAD Gorakhpur Kshetriya Gramin Bank v. Commissioner of Income-tax R.K. AGRAWAL AND MS. BHARATI SAPRU, JJ. ITR NO. 90 OF 1998 APRIL 19, 2007 Section 80P of the Income-tax Act, 1961 - Deductions - Income of co-operative societies â–  Business of banking cannot be carried out without aid of employees and, therefore, whatever amount assessee-society engaged in banking business, received either towards pay recovered from resigned staff, recovery of training cost, and forfeiture of security of such employees, was attributable to activity of carrying on business of banking and assessee was thus entitled to deduction under section 80P(2)(a) in respect of such amounts [Assessment year 1988-89] The assessee was a co-operative society engaged in the business of banking and providing credit facilities to its members. The receipt shown by it included the following items: pay recovered from resigned staff, recovery of training cost, and security forfeiture. The Assessing Officer held that the aforesaid receipts aggregating Rs. 3,40,534 did not arise from banking business and as such were not liable to deduction under section 80P(2)(a)(i ). Held that it was not in dispute that the assessee was a co-operative society and was engaged in the business of banking. For carrying on the business of banking, it had to employ persons. It provided training to such employees and recovered the cost of training. Under the terms of the contract, if an employee left the service midway, then the assessee forfeited the amount of security furnished by such an employee. For claiming exemption under clause (a) of sub-section (2) of section 80P, the assessee is required to establish that the income is attributable to carrying on the business of banking. The business of banking cannot be carried out without the aid of the employees and, therefore, whatever amount the assessee-society, engaged in banking business, received either towards excess provision of pay recovered from resigned staff, training cost, recovery and forfeiture of security of such employees, was attributable to the activity of carrying on the business of banking. Thus, the entire…

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