PRAKASH, J. - (1.) AT the instance of the Revenue, the Tribunal referred the following question under S. 256(1) of the IT Act 1961('the Act') briefly the Act, for the opinion of this Court. "Whether, the facts and in the circumstances of the case, the Tribunal was justified in holding that the income from interest on securities amounting to 13,477 was exempt from tax under cl. (c) of sub-s. (2) of S. 80P of the IT Act, 1961?"
(2.) UPON perusal of the order of the Tribunal, it appears that the assessee a co-operative society, derived income from various sources for the asst. yr. 1974-75 which is under consideration including the income of 13,477 from interest on securities in respect of which exemption was claimed by the assessee under S. 80P(2)(c) which was refused by the ITO. On appeal, the AAC accepted the claim of the assessee. On further appeal by the Revenue to the Tribunal, the order of the AAC was affirmed and the contention of the Revenue was rejected. The contention of the Revenue is that exemption in respect of the interest income of 13,477 derived from securities is available under S. 80P(2)(c) (ii) inasmuch as the said income did arise to the assessee from the activities envisaged by cl. (c) of sub-s. (2) of S. 80P. The ITO rejected the claim of the assessee saying that interest on Government security is taxable as the income of the co-operative society is above Rs. 2,500. The AAC accepted the contention of the assessee that interest income from securities being less than Rs. 20,000 is exempt under S. 80P(2)(c). Before the Tribunal the contention of the Revenue was that the assessee was not entitled to exemption on the income from interest on securities in view of the clear provisions of cl. (f) of sub-s. (2) of S. 80P which lays down that the income from interest on securities will be exempt only when the gross total income of the assessee does not exceed Rs. 20,000. The learned standing counsel reiterated before us that income by way of interest on securities will be exempt only under S. 80P(2)(c)(f) and not under cl. (c) of sub-s. (2) of S. 80P.
(3.) THE question, whether or not the assessee is entitled to exemption in respect of income by way of interest on securities, came up for consideration in the case of the assessee itself before this Court relating to the next preceding asst. yr. 1973-74 and then this Court held in CIT vs. Co- operative Cane Development Union Ltd. (1979) 10 CTR (All) 282 : (1979) 118 ITR 770, that so long as profits or gains are attributable to the activity of the assessee, they are exempt under cl. (c) of sub-s. (2) of S. 80P. This Court then observed that the activity of the assessee was supplying sugarcane and that the assessee was bound to invest 25 per cent of its profits in the Government securities to carry on its activity of supplying sugarcane. On these facts, this Court held that the investment of the statutory percentage of its profits in the Government securities was a condition precedent for carrying on the business and, therefore, the profits or gains from such investments were connected with or were incidental to the carrying on of the actual business of the assessee. This Court, therefore, then concluded that the Tribunal rightly held that the interest income received on Government securities was attributable to the activity carried on by the assessee within the meaning of cl. (c) of sub-s. (2) of S. 80P and, therefore, the assessee was entitled to exemption in respect of interest income which did not exceed Rs. 20,000. Following this authority relating to the case of the assessee itself with which we completely agree, we reject the submission made on behalf of the Revenue and uphold the view taken by the Tribunal.;