Co-operative bank income attribution supports deduction under section 80P(2)(a)(i) where banking-business nexus is factually established.

Interest on Government securities and dividends on shares received by a co-operative bank were treated as income attributable to its banking business, so they qualified for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Court accepted the Tribunal's factual finding that the income arose from the assessee's banking activity and noted that the Revenue failed to dislodge that finding. A contrary authority on Government securities was distinguished as resting on a different factual basis and not on a finding of business attribution. The Revenue's challenge therefore failed, and the assessee's claim to deduction was upheld.

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Issues: Whether interest on Government securities and dividends on shares received by a co-operative bank were income attributable to its banking business and therefore deductible under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The assessee was a co-operative society carrying on banking business. The Tribunal recorded a factual finding that the interest income was attributable to the assessee's business activity, and that finding was not successfully challenged. The decision relied on the statutory language of section 80P, under which profits and gains of business attributable to banking activity are deductible. The contrary authority on Government securities was held inapplicable on the facts because it proceeded on a different factual foundation and not on a finding that the income was attributable to the banking business.

Conclusion: The income qualified for deduction under section 80P(2)(a)(i), and the challenge by the Revenue failed.

Final Conclusion: The appeals were dismissed and the High Court's answer in favour of the assessee was left undisturbed.

Ratio Decidendi: Income attributable to the banking business of a co-operative society falls within the deduction under section 80P(2)(a)(i), and a factual finding of such attribution will not be interfered with in the absence of material to dislodge it.

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