- (1.) THIS is an appeal preferred by the Department under Section 260a of the IT Act, 1961, ("the act" for short ).
(2.) THE only question involved herein is whether the Tribunal is justified in holding that the respondent-assessee is entitled to deduction under Section 80p (2) (a) (i) of the Act in respect of the interest and dividend income of Rs. 2,50,664 derived out of investment in National Saving certificate, Indira Vikas Patra, Kisan Vikas Patra, short-term fixed deposits in banks and shares of Maharashtra State Finance Corporation of India.
(3.) THE assessee is a co-operative bank within the meaning of Section 2 (b-I) of the Karnataka co-operative Societies Act, 1959, and is registered as such under the provisions of the said Act. It is. a regional rural bank within the meaning of Regional Rural Banks Act, 1976. As per section 22 of the latter Act it is to be deemed to be a co-operative society for the purpose of the act. It appears that the above investments were made by the assessee-bank out of its surplus funds. The AO disallowed the deduction claimed by the assessee under Section 80p (2) (a) (i ). On appeal, CIT (A) took the view that the deduction claimed by the assessee is admissible only against the income from banking business and according to him since the income derived out of the investments referred to above was not a part of ordinary banking business of the assessee-bank, the deduction as claimed was not admissible. The assessee questioned the order of the CIT (A) before the Tribunal. The Tribunal, on consideration of the entire facts and circumstances, held that the assessee has rightly claimed the deduction and directed the AO to redo the assessment by granting such deduction,;