Banking investment income treated as business income and deductible where investments remain incidental to banking operations.

Income arising from investments made by a cooperative bank, including funds required by law to be placed in approved securities, is attributable to the business of banking when the investment activity remains connected with and incidental to banking operations. The settled principle that investment income of a banking concern forms part of business profits applies equally to cooperative banks. On that basis, such income is business income attributable to the banking business and is deductible under Section 80-P(2)(a)(i) of the Income-tax Act, 1961.

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Issues: Whether income arising from investments made by a cooperative bank, including funds statutorily required to be placed in approved securities, is attributable to the business of banking and deductible under Section 80-P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: Income from investments made by a banking concern forms part of the business of banking and is taxable as profits and gains of business. The settled principle applies equally where a cooperative bank is required by law to place a portion of its funds in approved securities, because such investment activity remains connected with and incidental to banking operations.

Conclusion: The income from such investments qualifies as business income attributable to the banking business and is deductible under Section 80-P(2)(a)(i) of the Income-tax Act, 1961.

Final Conclusion: The appeal failed and the assessee's claim to deduction was upheld.

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