Interest on surplus deposits held attributable to credit business, securing deduction for a co-operative society under section 80P(2)(a)(i).

Interest earned by a credit co-operative society on deposits with banks and co-operative societies was treated as attributable to its credit business because the funds were surplus working capital not immediately required for lending to members. The broader expression "attributable to" was applied in preference to the narrower "derived from", so the receipts formed part of the profits and gains of the business of providing credit facilities. As the deposits were not mere liabilities or amounts due to members, the contrary classification as income from other sources was not accepted, and deduction under section 80P(2)(a)(i) was allowed.

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Issues: Whether interest income earned by a credit co-operative society from deposits with banks and co-operative societies is attributable to its business of providing credit facilities to members and qualifies for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961.

Analysis: The assessee is a credit co-operative society engaged in providing credit facilities to its members. The interest income arose from deployment of working capital and surplus funds not immediately required for lending to members. The controlling principle applied was that the expression "attributable to" is wider than "derived from", and interest earned on such deposits is part of the profits and gains of the business of providing credit facilities. The distinguishing feature of interest on amounts that are mere liabilities or amounts due to members was absent on the facts, and the contrary view based on treatment as income from other sources was not accepted for the assessee's claim under section 80P(2)(a)(i).

Conclusion: The interest income was held to be business income attributable to the assessee's credit business, and deduction under section 80P(2)(a)(i) was allowed in favour of the assessee.

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