Rental income of a co-operative society was taxable as property income, not eligible for business-linked exemption under Section 80P.

Rental income from letting surplus space in a co-operative credit society's building was treated as property income, not business income, because it was not shown to arise from carrying on the society's specified business activity. Section 80P(2)(a)(i) applies only to profits attributable to the co-operative society's eligible business, and mere ownership or letting of property does not satisfy that test. In the absence of any bye-law or statutory provision making building ownership or leasing part of the society's business, the exemption claim failed and the income remained taxable outside section 80P relief.

---

---

Issues: Whether rental income from letting out a portion of the assessee co-operative credit society's building was assessable as business income so as to qualify for exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The exemption under section 80P(2)(a)(i) applies only to profits and gains of business attributable to carrying on the specified activities of a co-operative society. The assessee was not a banking company and could not rely on section 6(1)(k) of the Banking Regulation Act, 1949. No bye-laws or statutory provision were produced to show that owning or letting out a building was part of the society's business activity. The rental receipt arose from letting out surplus space and was merely an incident of ownership, not an income earned in carrying on the activity of providing credit facilities to members. The earlier tribunal decision relied upon was held distinguishable, while the authorities treating such rent as non-business income were preferred.

Conclusion: The rental income was not eligible for exemption under section 80P(2)(a)(i) and was correctly assessable as property income; the assessee's claim failed.

Final Conclusion: The appellate order granting exemption was set aside and the assessment made by the Income-tax Officer was restored, resulting in success for the Revenue.

Ratio Decidendi: Rental income from a property owned by a co-operative society is not exempt under section 80P(2)(a)(i) unless it is shown to be profits and gains attributable to the society's specified business activity; mere ownership and letting of surplus space do not constitute such business activity.

---