2007 (4) TMI 212

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....t the income earned by the assessee co-operative society from recovery of pay made from the staff, recovery of training cost and security forfeiture from staff is not attributable to its business of banking or providing credit facilities to its members and hence not deductible under section 80P(2)(a)(i) of the Income-tax Act, 1961 ?" 2. The reference relates to the assessment year 1988-89. 3. Briefly stated the facts giving rise to the present writ petition are as follows : 4. The assessee is a co-operative society engaged in the business of banking and providing credit facilities to its members. The receipts shown by it included the following items :   Rs. (i) Pay recovered from resigned staff 20,377 (ii) Recov....

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....s that activities were not relevant to banking business, the matter on this limited issue was set aside and restored to the file of the Assessing Officer with the observation that the amounts were mere reimbursement of expenses actually incurred by the assessee and it has therefore to be found out whether any surplus resulted to the assessee which could be included in its total income. 6. We have heard Shri Pankaj Bhatia, learned counsel appearing on behalf of Shri Yashwant Sharma, learned counsel for the applicant, and Shri Shamboo Chopra, learned counsel appearing for the Revenue. 7. Learned counsel for the applicant submitted that the applicant is engaged in the banking activities in connection with which it has to engage persons. ....

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....xemption under clause (a) of sub-section (2) of section 80P of the Act, the applicant is required to establish that the income is attributable to carrying on the business of banking. The business of banking cannot be carried out without the aid of the employees and, therefore, whatever amount the applicant has received either towards excess provision of pay recovered from resigned staff, training cost, recovery and forfeiture of security of employees is attributable to the activity of carrying on the business of banking. It is not the case of the Revenue that apart from carrying on the business of banking, the applicant is also running the training institute for training of persons in the banking industry for providing services of trained p....