Law:

Section:

Section 80P of the Income-tax Act, 1961 - Deductions - Income of co-operative societies - Assessment years 1998-99, 2000-01 and 2003-04 - Assessee was a co-operative society carrying on banking activities - During relevant assessment years, it received interest on loans given to its staff/employees against PF deposits or for house building and claimed same to be exempted under section 80P(2)(a)(i) - Whether when advancement of loan by assessee to its employees was not in capacity of banker but was in capacity of it being an employer to its employees, interest earned by assessee on loans in question could be said to be amount of profits and gains of business attributable to carrying on business of banking by assessee and it would be exempt under section 80P(2)(a)(i) - Held, no FACTS The assessee was a co-operative society and carried on banking activities, including providing of credit facilities to its members. During the relevant assessment years, it received interest on loans given to its staff/employees against PF deposits or for house building and claimed the same to be exempted under section 80P(2)(a)( i). The Assessing Officer denied the exemption holding that under section 80P(2)(a)( i), only such amount of profits and gains of business, as are attributable to the carrying on business of banking or providing credit facilities to its members by the assessee, is exempt and income by way of interest received by the assessee on loan given to its employees against PF or for house building loan did not fall within the said definition and was, therefore, not exempt. On appeal, the Commissioner (Appeals) in some cases allowed the exemption to the assessee, while in other cases upheld the view taken by the Assessing Officer. On cross appeals, the Tribunal held that the interest earned on the loans given to its staff members, whether it be against PF deposit or for house building, was exempt under section 80P(2)(a)( i). On the revenue's appeals to the High Court : HELD The provisions of section 80P provide that in case of the assessee being a co-operative society engaged in carrying on the business of banking or providing credit facilities to its members, whole of…

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