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Issues involved: Appeal against order of Income Tax Appellate Tribunal regarding exemption claim under Section 80P (2) (a) (i) for interest earned from deposits made with a private limited company.
Summary: The appellant, a Co-Operative Society engaged in banking business, filed a return seeking exemption on interest earned from deposits with a private limited company. The Assessing Officer, Commissioner of Income Tax (Appeals), and Appellate Tribunal disallowed the claim, stating the deposits were not made with a statutory Co-Operative Society or Bank. The main question of law was whether deductions under Section 80P(2)(a)(i) are available for investments in private limited companies. It was noted that Section 80P allows deductions for income of Co-Operative Societies engaged in banking. The definition of "Banking" in the Banking Regulation Act, 1949 includes accepting deposits of money for lending or investment, which earn interest. The appellant had deposited excess money with a private limited company to earn interest. Referring to a previous case, the court held that interest earned on such deposits in any banking activity is exempted under Section 80P. Therefore, the court ruled in favor of the appellant, allowing the exemption claim. This judgment clarifies the eligibility for deductions under Section 80P for Co-Operative Societies engaged in banking activities, emphasizing the definition of "Banking" and the exemption for interest earned on deposits made in banking activities.
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