Rental income from property let by a co-operative bank is not attributable to banking business for section 80P deduction.

Rental income from letting out property by a co-operative bank was treated as an independent exploitation of property, not as income attributable to the business of banking. Applying the statutory meaning of banking under the Banking Regulation Act and the principle that only operational income from the specified banking activity qualifies, the article states that such rental receipts do not fall within the deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

---

---

Issues: Whether rental income derived from letting out property by a co-operative bank is attributable to the business of banking and eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: Deduction under section 80P is confined to profits and gains of business attributable to the specified banking or credit activities. For determining whether the letting activity was part of banking business, the judgment referred to the statutory meaning of banking under section 5(b) of the Banking Regulation Act, 1949 and the permitted forms of business under section 6 of that Act. Letting out premises was held to be an independent activity for exploiting property and not an activity connected with banking or providing credit facilities. The judgment followed the jurisdictional High Court view that such rental income is not derived from banking operations and also relied on the principle that only operational income attributable to the specified business qualifies for the deduction.

Conclusion: Rental income from letting out property is not attributable to the business of banking and is not eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Ratio Decidendi: Income from letting out property by a co-operative bank is not operational income attributable to banking activity and therefore does not qualify for deduction under section 80P(2)(a)(i).

---