Co-operative society interest on bank deposits qualifies for business deduction where income is attributable to its activities.

Interest income earned by a co-operative society from fixed deposits placed with banks was treated as attributable to the society's business activities, following the view adopted by the Coordinate Bench and authority supporting that approach. On that basis, the income was regarded as business income eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, and the deduction was allowed in favour of the assessee.

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Issues: Whether interest income earned by a co-operative society from deposits placed with banks is eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The claim was examined in the context of conflicting High Court views on whether interest earned on surplus funds invested in deposits can be treated as income attributable to the business activities of a co-operative society. Following the view adopted by the Coordinate Bench and relying on the line of authority that treats such interest as attributable to the society's activities, the interest income from fixed deposits with banks was considered to partake the character of business income eligible for deduction.

Conclusion: The deduction under section 80P(2)(a)(i) was held allowable in favour of the assessee.

Ratio Decidendi: Interest income derived by a co-operative society from bank deposits, where the income is treated as attributable to its business activities, qualifies for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

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