Refund interest attributable to banking business qualifies for deduction; income from other sources treatment was deleted.

Interest received on income-tax refund under section 244A was held to have a sufficient commercial and causal nexus with the assessee's banking business for deduction under section 80P(2)(a)(i). The Tribunal applied the wider meaning of "attributable to", as distinct from "derived from", and followed the binding Special Bench view that refund interest arising from tax paid in relation to banking activity retains the requisite business connection. The amount could not be assessed as income from other sources, and the corresponding addition was deleted in favour of the assessee.

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Issues: Whether interest received on income-tax refund under section 244A was attributable to the assessee's banking business so as to qualify for deduction under section 80P(2)(a)(i), instead of being assessed as income from other sources.

Analysis: The Tribunal applied the settled principle that the expression "attributable to" has a wider connotation than "derived from" and can cover income having a commercial or causal connection with the banking business. Following the binding Special Bench view, it held that the refund interest arose out of tax paid in relation to the assessee's banking activity and therefore retained the requisite nexus with the business of banking. On that basis, the interest could not be denied deduction merely because it was received as statutory interest on a tax refund, and the corresponding addition under the head income from other sources could not stand.

Conclusion: The interest on income-tax refund was held eligible for deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961, and the addition made by treating it as income from other sources was deleted in favour of the assessee.

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