Attributable interest from surplus bank deposits qualifies as business income and is deductible under Section 80P(2)(a)(i).

Interest earned on short-term fixed deposits placed from surplus member funds is treated as receipts attributable to the cooperative society's credit business rather than a separate undertaking; the statutory phrase "attributable to" is construed more broadly than "derived from" and covers incidental receipts arising from prudent investment of surplus funds. Applying that principle, interest on bank fixed deposits linked to acceptance of member deposits and lending activities qualifies for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961, and the assessee's claim on this issue succeeds.

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Issues: Whether interest earned by a credit cooperative society on fixed deposits with banks is income attributable to its business of providing credit facilities to members and therefore eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The statutory phrase "attributable to" in Section 80P(2)(a)(i) has wider import than "derived from" and covers receipts not directly produced by the immediate conduct of lending when such receipts arise as an incident of the credit business. A credit cooperative society that accepts deposits from members and provides credit to members may prudently invest surplus funds in short-term deposits; interest from such deposits is connected to and arises out of the society's credit business rather than a separate undertaking. Coordinate authority applying the Karnataka High Court decision (Tumkur merchants) and Tribunal precedents holds that interest on such deposits is attributable to the credit business and therefore falls within Section 80P(2)(a)(i).

Conclusion: Interest earned on fixed deposits with banks is attributable to the business of providing credit facilities to members and is eligible for deduction under Section 80P(2)(a)(i) of the Income-tax Act, 1961; the assessee's appeal is allowed on this issue.

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