Co-operative Society – Income from underwriting commission and interest on PSEB Bonds and IDBI Bonds derived by a banking concern is income from banking business and hence qualified for deduction u/s. 80P(2)(a)(i).

The following two questions, arose for determination before the Supreme Court: (a) Whether the High Court was justified in holding that the respondent-assessee was entitled for deduction u/s. 80P(2)

(a)(i) of the Income-tax Act, 1961, in respect of income from underwriting commission and interest on PSEB Bonds and IDBI Bonds?

 (b) Whether the High Court was justified in affirming the decision of the Tribunal that the income earned by the assessee which was derived from underwriting the issue of bonds and investments in PSEB Bonds was in the nature of income from banking business and hence qualified for deduction u/s. 80P(2)(a)(i) of the Income Tax Act, 1961 ?

The Supreme Court dismissed the appeals filed by the Department in view of its decision in CIT vs. Nawanshahar Central Co-op. Bank Ltd. (2007) 289 ITR 6 (SC).