Section 80P deduction for fixed-deposit interest upheld where surplus co-operative funds were attributable to credit business, not member liabilities.

Interest earned by a primary agricultural credit co-operative society on surplus funds placed in fixed deposits was held attributable to the business of providing credit facilities to members, because the funds were not amounts payable to members and were not held as a liability. The wider expression "attributable to" in section 80P was applied rather than the narrower "derived from", and the Supreme Court decision in Totgars was distinguished on the basis that it concerned retained sale proceeds representing a liability. The fixed-deposit interest therefore qualified for deduction under section 80P(2)(a)(i), and the disallowance was held unsustainable.

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Issues: Whether interest income earned by a primary agricultural credit co-operative society from fixed deposits is deductible under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The Tribunal followed the binding jurisdictional High Court decisions holding that the expression "attributable to" in section 80P is of wider import than "derived from". Interest earned by a co-operative society on surplus funds temporarily placed in fixed deposits, where such funds are not amounts payable to members and are not held as a liability, is attributable to the business of providing credit facilities to members. The Supreme Court decision in Totgars was distinguished on its facts because that case involved retained sale proceeds representing a liability.

Conclusion: The interest income from fixed deposits qualified for deduction under section 80P(2)(a)(i), and the disallowance made by the authorities below was unsustainable. The appeal was allowed in favour of the assessee.

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