- (1.) WE have heard Shri Shambhu Chopra, learned counsel for the Income Tax Department. Shri R.R. Agrawal appears for the respondent.
(2.) THIS income tax appeal was admitted on the following questions of law: - "(1) Whether on the facts and in the circumstances of the case the Ld. ITAT is legally justified in holding that the income from Bank interest is exempt U/s 80P (2) and also relying on the decision of CIT v. Karnataka State Cooperative Apex Bank? (2) Whether on the facts and in the circumstances of the case the Ld. ITAT is legally justified in holding that the interest earned from post office is exempt and also relying on the decision of CIT v. Karnataka State Cooperative Apex Bank? (3) Whether on the facts and in the circumstances of the case, the Ld. Income Tax Appellate Tribunal is legally justified in holding that the interest earned on NSC is allowable." The respondent assessee is a society registered under the Cooperative Societies Act. Its object and activity involve carrying out of providing credit facilities to the members of the society, marketing the agricultural produce of its members, purchasing and selling agricultural implements and seeds for supplying to its members.
(3.) FOR the assessment year 1985 -86, the respondent assessee claimed deduction of income under Section 80P (2) (a) (i) on interest income earned from National Saving Certificate as well as the income from the interests on deposits in the post office. The Assessing Officer did not allow the exemption of income from interest on such deposits. The Appellate Authority partly allowed the appeal. On the question of income of interest the Appellate Authority found that Section 80P (2) (c) specifies and the deductions to the cooperative society on activities other than those specified in Clause (a) and Clause (b), independently of, or in addition to all or any of the activities specified. The expression 'attributable to', is much wider than the expression derived from and covers receipts from sources, other than the actual conduct of business.;