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5.4 That the intent and purpose of Section 80P(2)(a)(i) of the Act is to grant deduction to income which has a direct and proximate nexus to the activity of banking or providing credit facility carried on by a Cooperative Society. That if both the terms banking business and Sproviding credit facilities are read together the intention of the legislature becomes clear and that is to provide benefit of deduction to a cooperative society which actually provides credit/finance to its members in furtherance of the cooperative movement and not for the purposes of profit making. That strictly speaking only activities specified in the definition of banking as per Section 5(b) of the B.R. Act can give rise to income which can be claimed to be deductible u/s.80P(2)(a)(i) of the Act and not the other activities enumerated in Section 6(1)(a) of the B.R. Act.

6 On behalf of the assessee it was submitted that the width and scope of income governed under Section 80P(2)(a)(i) of the Act is such which would take within its fold all income arising from investments in securities considering the definition of Banking under Section 5(b) of the Act and 6(1)(a) of the B.R. Act. That investment in securities is part of ordinary banking business; it is normally a mode of carrying on banking business to invest monies in such a manner that they are readily available and that is just as much part of conducting bank's business as receiving deposits or lending monies; investments in securities which are easily realizable would be part of the stock-in-trade or circulating capital and therefore eligible for deduction under Section 80P(2)(a)(i) of the Act.

(a)in the case of a co-operative society engaged in '(i) carrying on the business of banking or providing credit facilities to its members, or ii. xxx xxx xxx iii. xxx xxx xxx iv. xxx xxx xxx v. xxx xxx xxx vi. xxx xxx xxx vii. xxx xxx xxx the whole of the amount of profits and gains of business attributable to any one or more of such activities.

27. Sub-section (1) of Section 80P stipulates that in case of an assessee who is a Cooperative Society, the sums specified in Sub-section (2) shall be deducted while computing total income of the assessee, provided the gross total income includes any income referred to in Sub-section (2). Sub-section (2) specifies the sums which are deductible by way of specifying activities in Clauses (a) to (f). In Clause (a) again, the activities which are of the prescribed nature, are specified vide sub-Clauses (i) to (vii). In the event of a Co-operative Society carrying on any one of such businesses as specified by sub-Clauses (i) to (vii) or engaged in any one or more such activities the whole of the amount of profits and gains of business attributable to any one or more activities shall be deducted. Thus, the provision itself gives an inherent indication that for the purpose of constituting the sum deductible while computing the total income of the assessee, the sum has to be the amount of profits and gains of business. It is necessary to take note of the fact that in Sub-section (2) of Section 80P of the Act word 'income' is not used but the word used is 'sum' which is the 'whole of the amount of profits and gains of business'. Therefore, under Sub-section (1) the gross total income has to include income from any of the specified activities and for the purpose of deduction the sums specified in Sub-section (2) shall be deducted in computing the total income of an assessee, namely, a Co-operative Society. Before analysing sub-Clause(i) of Clause (a) of Sub-section (2) of Section 80P of the Act it is necessary to take note that under Sub-section (3) of Section 80P the deduction available under Sub-section (1) of Section 80P shall be allowed after reducing from the qualifying income, the income, if any, as referred to in Sections specified therein viz. Section 80HH etc. This is one more indication available in the Scheme of the Act to denote that what is deductible under the provisions of Chapter VI-A is in terms of the provisions of the Act with special reference to Section 80B(5) read with Section 80AB of the Act is the net figure.

34. The assessee, being a Co-operative Society is governed by GCS Act and because it carries on business of banking it is also amenable to provisions of B.R. Act. Section 2(7) of the GCS Act defines a 'Co-operative Bank' to mean a society registered under the GCS Act and doing business of banking as defined in Clause (b) of Sub-section (1) of Section 5 of the Banking Companies Act,1949 (now the B.R. Act). Section 2(19) of the GCS Act defines a 'society' to mean a Co-operative Society registered, or deemed to be registered, under the GCS Act. These two definitions assume importance considering the fact that Section 80P of the Act does not use the term Co-operative Bank ; Section 80P only talks of an assessee which is a Co-operative Society. It is in light of this distinction between the use of the terms that one will have to appreciate whether the business of banking as contemplated by Section 80P of the Act is required to be restricted only to the definition given under Section 5(b) of the B.R. Act. Section 2(24) of the GCS Act defines 'Working Capital 'to mean funds at the disposal of a society inclusive of paid up share capital, funds built out of profits, and money raised by borrowing and by other means. Here also the definition cannot be restricted to mean money raised by borrowing as was sought to be contended by revenue. Sources of working capital are inclusive in nature, viz apart from paid up share capital, funds built out of profits and money raised by borrowing, there could be monies raised by other means also which would constitute working capital of a Co-operative Society.