- (1.) This is an appeal filed by the Commissioner of Income-tax, Muzaffar Nagar, under Section 260A of the Income-tax Act, 1961, relating to the assessment year 2002-03.
(2.) The following question has been raised: Whether on the facts and circumstances of the case, the Income-tax Appellate Tribunal is legally correct in holding that the interest earned by the co-operative bank on deposits of its non-SLR funds qualify for deduction under Section 80P(2)(a)(i) of the Income-tax Act 1961?
(3.) The assessee is a regional rural bank set up under the provisions of the Regional Rural Banks Act, 1976. This bank is declared to be a co-operative society for the purpose of the Income-tax Act, 1961 (hereinafter referred to as "the Act"). For the assessment year under consideration, the assessee filed the return of income on July 31, 2001, and claimed the deduction of its entire income amounting to Rs. 65,86 under Section 80P(2)(a)(i) of the Act. The return was accepted under Section 143(1)(a) of the Act. Subsequently, a notice under Section 148 of the Act was issued and the case was reopened with the view to disallow the deduction in respect of the interest income accrued on the investment. According to the assessee, the claim did not qualify for the exemption under Section 80P(2)(a)(i) of the Act. The plea of the assessee was not accepted and the assessing authority passed the assessment order and disallowed the claim for exemption.;