Banking income from voluntary fund investments qualifies for cooperative bank deduction under section 80P(2)(a)(i).

Interest earned by a primary cooperative bank on voluntary investment of non-statutory funds was treated as income arising from its banking operations. The Calcutta HC noted that banking under section 5(b) of the Banking Regulation Act includes acceptance of deposits for lending or investment, and that section 56(c) extends this framework to cooperative banks. On those facts, the investment activity was regarded as part of the bank's business, so the interest was characterised as business income and found eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

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Issues: Whether interest earned by a primary cooperative bank from investment of non-statutory funds forms part of its banking business and is therefore eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The assessee was accepted to be a primary cooperative bank engaged in banking business. Banking, as defined in section 5(b) of the Banking Regulation Act, 1949, includes acceptance of deposits for lending or investment, and section 56(c) extends that framework to cooperative banks. On the facts, the non-statutory funds were voluntarily invested by the assessee, and the resulting interest was treated as arising from an activity within banking operations. No further factual enquiry was found necessary, and the income was regarded as business income.

Conclusion: The interest income from investment of non-statutory funds was held to be business income and was held to be eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

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