Law:

Section:

Section 80P of the Income-tax Act, 1961, read with section 6(1) of the Banking Regulation Act, 1949 - Deductions - Income of co-operative societies - Assessment years 1989-90 to 1991-92 - Whether interest received by co-operative bank from setting apart certain funds as reserve fund is exempted from payment of tax under section 80P(2)(a)(i) - Held, yes - Whether income received by co-operative bank by letting out premises belonging to it is exempted from payment of tax under section 80P(2)(a)(i) - Held, yes FACTS The assessee was a grain merchant co-operative bank engaged in banking activity. The Assessing Officer, while completing the assessment, took the view that the rental income received by the assessee from letting out the portion of the building partly occupied by it, and the interest received from setting apart certain funds as reserve fund, did not come within the purview of section 80P(2)(a)( i) and as such were not deductible while computing the income of the assessee. On appeal, the Commissioner (Appeals) allowed the appeal, accepting the contention of the assessee that the rental income received by it as well as the interest received on reserve fund were exempted from payment of tax under section 80P(2)(a)( i). The Tribunal affirmed the order passed by the Commissioner (Appeals). On revenue's appeal under section 260A : HELD So far as the first contention was concerned, the same was covered against the revenue by the High Courts decision rendered in the case of ITO v. Karnataka General Co-operative Bank Ltd. (IT Appeal No. 183 of 2003). In the said decision, the Court has taken the view that the income received out of the reserve fund is exempted from payment of tax. [Para 5] From the reading of clauses (k ) and (l) of section 6 of the Banking Regulation Act, it appears that in addition to the business of banking set out in clause (b) of section 5 of the Banking Regulation Act, acquisition, construction, maintenance and alteration of any building or works necessary or convenient for the purpose of the banking company and also selling/improving or leasing or otherwise dealing with all or any part of the property and rights of the company, also…

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