Statutory reserve-fund interest remains attributable to banking business, preserving co-operative bank exemption under section 80P(2)(a).

Where a co-operative apex bank is statutorily required to invest its reserve fund in approved securities, the interest earned on those securities is income attributable to its banking business under section 80P(2)(a) of the Income-tax Act, 1961. The commercial character of the income was not altered by assessment under a separate head, and the wider expression "attributable to" was treated as sufficient to cover the compulsory reserve-fund investment. The reliance placed on authorities involving different wording or factual settings did not displace the exemption, so the exemption continued and the reassessment orders were not restored.

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Issues: Whether the interest on securities representing investments made out of the statutory reserve fund of a co-operative apex bank was income attributable to the business of banking or providing credit facilities to its members under section 80P(2)(a) of the Income-tax Act, 1961, so as to remain exempt.

Analysis: The assessee was a co-operative apex bank whose reserve fund investment in approved securities was not voluntary surplus deployment but a statutory requirement under the Karnataka Co-operative Societies Act, 1959 and the Karnataka Co-operative Societies Rules, 1960. The income from those securities, though assessed under a separate head, remained part of the business income because the head under which income is computed does not determine its true commercial character. The expression "attributable to" in section 80P(2)(a) has a wider import than "derived from", and the interest on securities acquired under a compulsory reserve-fund arrangement was sufficiently connected with the banking business of the assessee. The revenue's reliance on authorities dealing with different statutory wording or different factual settings did not dislodge the exemption already allowed in the original assessments.

Conclusion: The interest on securities invested out of the reserve fund was held to be income attributable to the assessee's banking business and therefore remained exempt under section 80P(2)(a).

Final Conclusion: The reassessment orders were not restored and the first appellate order allowing the exemption was upheld.

Ratio Decidendi: Where a co-operative bank is statutorily required to invest its reserve fund in securities, the interest earned on those securities is income attributable to its banking business for purposes of section 80P(2)(a) of the Income-tax Act, 1961.

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