Our co-operative society has receipts that fall outside the activities named in section 80P(2)(a). Can we fall back on the residual deduction in clause (c), and what do we have to show?
It depends, and the test is narrower than the words look. The Kerala High Court held that clause (c) does reach receipts from sources other than the actual conduct of the business, because 'attributable to' is much wider than 'derived from'. But the receipt must be attributable to an activity that the society itself carries on. 'Activity' is wider than 'business' and connotes a specified form of supervised action or field of action. On that test the society failed: rent from letting surplus space in the building it owned and used for its own banking work was held not to arise from such an activity, and the deduction was refused.
Decided by the High Court (High Court of Kerala - K.S. Paripoornan and M. Fathima Beevi, JJ.) on 1987-10-09, reported as [1988] 172 ITR 443 (Kerala); [1988] 40 Taxman 259 (Kerala); Income-tax Reference Nos. 8 and 9 of 1985. It bears on section 80P(2)(c), section 80P of the Income Tax Act 1961, in Co-operative Societies and Deductions & Disallowances matters.
Clause (c) is where a society goes when its receipt does not fit any of the named activities in section 80P(2)(a), and this is the decision that tells you how far it stretches. It gives the taxpayer the wide reading of 'attributable to' taken from the Supreme Court's language on that phrase, so a receipt need not spring from the actual conduct of the business. What it takes back is the requirement of an activity: the society must point to something it does, a field of action it has undertaken, to which the receipt is attributable with a direct or proximate connection. Passive enjoyment of an asset is not that. The rent example is the useful one, because letting surplus space in one's own premises is the commonest clause (c) claim and this judgment rejects it.
Binding within that High Court's jurisdiction. Persuasive elsewhere.
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The assessee was a co-operative land mortgage bank. It owned a building, part of which it used for its own banking business. The surplus space in that building was let out. For assessment year 1978-79 the rent received was Rs 29,139 and for assessment year 1979-80 it was Rs 20,564. The society claimed the deduction of Rs 20,000 available under section 80P(2)(c) for each of the two years, on the footing that the rent was profits and gains attributable to an activity it carried on which was not one of the activities specified in section 80P(2)(a) or (b). The claim was disallowed and the matter came to the High Court on references under section 256(1) for assessment years 1978-79 and 1979-80, the question being whether the society was entitled to the deduction under clause (c) in respect of the rental income from letting the surplus portion of the building.
The Court answered against the assessee and held that the rent was not eligible for the deduction under section 80P(2)(c). In doing so it accepted the wider part of the assessee's argument on construction. The expression 'attributable to' is much wider than the expression 'derived from', and it covers receipts from sources other than the actual conduct of the business. The word 'activity' in clause (c) is wider than the word 'business': it connotes a specified form of supervised action or field of action, so a society may qualify in respect of what it does even if what it does would not be called a business in the ordinary sense. But the receipt still has to be attributable to an activity the society carries on. Letting out the surplus space in a building owned and used by the assessee is not such an activity falling under clause (c), and the rent received was accordingly outside the deduction.
The Court read clause (c) as a residual provision that operates where a co-operative society is engaged in activities other than those specified in clauses (a) and (b), and gives it a fixed deduction out of the profits and gains attributable to those other activities. Two words carried the construction. The first was 'attributable to'. Following the settled distinction, the Court held it to be much wider than 'derived from', so the deduction is not confined to what the society earns in the actual conduct of a business; a receipt one step removed can still qualify. The second was 'activity'. Here the Court moved in the opposite direction from the revenue's reading, holding that 'activity' is wider than 'business' and denotes a specified form of supervised action or field of action, that is, the operations the society undertakes as a corporate body, whether or not they amount to a business as ordinarily understood. Taken together, the two words set the test: is there an activity the society carries on, and is the receipt attributable to it? On the facts, the society ran a banking business and owned a building for it. It did not carry on any activity of exploiting property; it simply had space it did not need and let it. The rent was therefore attributable to the ownership of an asset rather than to any field of action the society had taken up, and the claim failed for want of an activity to attach the receipt to.
The word 'activity' is wider than the word 'business'. It connotes a specified form of supervised action or field of action.
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Handle my notice → Ask a CA on WhatsAppIt depends, and the test is narrower than the words look. The Kerala High Court held that clause (c) does reach receipts from sources other than the actual conduct of the business, because 'attributable to' is much wider than 'derived from'. But the receipt must be attributable to an activity that the society itself carries on. 'Activity' is wider than 'business' and connotes a specified form of supervised action or field of action. On that test the society failed: rent from letting surplus space in the building it owned and used for its own banking work was held not to arise from such an activity, and the deduction was refused. This was decided by the High Court (High Court of Kerala - K.S. Paripoornan and M. Fathima Beevi, JJ.) and bears on section 80P(2)(c), section 80P of the Income Tax Act 1961. It is reported as [1988] 172 ITR 443 (Kerala); [1988] 40 Taxman 259 (Kerala); Income-tax Reference Nos. 8 and 9 of 1985. Clause (c) is where a society goes when its receipt does not fit any of the named activities in section 80P(2)(a), and this is the decision that tells you how far it stretches. It gives the taxpayer the wide reading of 'attributable to' taken from the Supreme Court's language on that phrase, so a receipt need not spring from the actual conduct of the business. What it takes back is the requirement of an activity: the society must point to something it does, a field of action it has undertaken, to which the receipt is attributable with a direct or proximate connection. Passive enjoyment of an asset is not that. The rent example is the useful one, because letting surplus space in one's own premises is the commonest clause (c) claim and this judgment rejects it. If it applies to you, the first step is this: Identify the activity first, then the receipt: describe what the society actually does that produces the money, in the language of a field of action it has undertaken.
The assessee was a co-operative land mortgage bank. It owned a building, part of which it used for its own banking business. The surplus space in that building was let out. For assessment year 1978-79 the rent received was Rs 29,139 and for assessment year 1979-80 it was Rs 20,564. The society claimed the deduction of Rs 20,000 available under section 80P(2)(c) for each of the two years, on the footing that the rent was profits and gains attributable to an activity it carried on which was not one of the activities specified in section 80P(2)(a) or (b). The claim was disallowed and the matter came to the High Court on references under section 256(1) for assessment years 1978-79 and 1979-80, the question being whether the society was entitled to the deduction under clause (c) in respect of the rental income from letting the surplus portion of the building. The matter was decided on 1987-10-09 by the High Court (High Court of Kerala - K.S. Paripoornan and M. Fathima Beevi, JJ.). On those facts the High Court held as follows. The Court answered against the assessee and held that the rent was not eligible for the deduction under section 80P(2)(c). In doing so it accepted the wider part of the assessee's argument on construction. The expression 'attributable to' is much wider than the expression 'derived from', and it covers receipts from sources other than the actual conduct of the business. The word 'activity' in clause (c) is wider than the word 'business': it connotes a specified form of supervised action or field of action, so a society may qualify in respect of what it does even if what it does would not be called a business in the ordinary sense. But the receipt still has to be attributable to an activity the society carries on. Letting out the surplus space in a building owned and used by the assessee is not such an activity falling under clause (c), and the rent received was accordingly outside the deduction.
The Court read clause (c) as a residual provision that operates where a co-operative society is engaged in activities other than those specified in clauses (a) and (b), and gives it a fixed deduction out of the profits and gains attributable to those other activities. Two words carried the construction. The first was 'attributable to'. Following the settled distinction, the Court held it to be much wider than 'derived from', so the deduction is not confined to what the society earns in the actual conduct of a business; a receipt one step removed can still qualify. The second was 'activity'. Here the Court moved in the opposite direction from the revenue's reading, holding that 'activity' is wider than 'business' and denotes a specified form of supervised action or field of action, that is, the operations the society undertakes as a corporate body, whether or not they amount to a business as ordinarily understood. Taken together, the two words set the test: is there an activity the society carries on, and is the receipt attributable to it? On the facts, the society ran a banking business and owned a building for it. It did not carry on any activity of exploiting property; it simply had space it did not need and let it. The rent was therefore attributable to the ownership of an asset rather than to any field of action the society had taken up, and the claim failed for want of an activity to attach the receipt to. In the words reproduced by the source cited on this page: "The word 'activity' is wider than the word 'business'. It connotes a specified form of supervised action or field of action."
It was decided by the High Court on 1987-10-09 and is reported as [1988] 172 ITR 443 (Kerala); [1988] 40 Taxman 259 (Kerala); Income-tax Reference Nos. 8 and 9 of 1985. Binding within that High Court's jurisdiction. Persuasive elsewhere. A High Court decision binds the assessing officer, the Commissioner (Appeals) and the Income Tax Appellate Tribunal within that state, and is persuasive elsewhere. If your assessment is in a different jurisdiction, check whether your own High Court has taken the same view before relying on it. On section 80P(2)(c), section 80P, the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the department, and it appears in this library for that reason — you need to know what the Assessing Officer will cite against you. The Court answered against the assessee and held that the rent was not eligible for the deduction under section 80P(2)(c). In doing so it accepted the wider part of the assessee's argument on construction. The expression 'attributable to' is much wider than the expression 'derived from', and it covers receipts from sources other than the actual conduct of the business. The word 'activity' in clause (c) is wider than the word 'business': it connotes a specified form of supervised action or field of action, so a society may qualify in respect of what it does even if what it does would not be called a business in the ordinary sense. But the receipt still has to be attributable to an activity the society carries on. Letting out the surplus space in a building owned and used by the assessee is not such an activity falling under clause (c), and the rent received was accordingly outside the deduction. It arises in Co-operative Societies and Deductions & Disallowances matters, on section 80P(2)(c), section 80P of the Income Tax Act 1961, and was decided by High Court of Kerala - K.S. Paripoornan and M. Fathima Beevi, JJ.. Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Show the direct or proximate connection between that activity and the receipt; a link through an asset the society happens to own will not do. Use the width of 'attributable to' to answer the officer who insists the income must come from the conduct of the business itself. Do not put a claim for rent from letting surplus space in the society's own building on clause (c) alone - this judgment is squarely against it. Check whether section 80P is available to your society at all before relying on a 1987 decision, since the section has been amended since.
Still good law. No decision overruling or doubting this judgment was traced in searches run on 1 September 2026. What could not be checked is the effect of later amendments to section 80P on a co-operative land mortgage bank, which is a statutory question rather than one of the standing of this decision. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
The judgment has not been read from the Court's own record. It construes section 80P(2)(c) as it stood for assessment years 1978-79 and 1979-80; whether the section as it now stands is available to a society of this kind has not been verified from any source read for this entry, and must be checked separately. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The Court answered against the assessee and held that the rent was not eligible for the deduction under section 80P(2)(c). In doing so it accepted the wider part of the assessee's argument on construction. The expression 'attributable to' is much wider than the expression 'derived from', and it covers receipts from sources other than the actual conduct of the business. The word 'activity' in clause (c) is wider than the word 'business': it connotes a specified form of supervised action or field of action, so a society may qualify in respect of what it does even if what it does would not be called a business in the ordinary sense. But the receipt still has to be attributable to an activity the society carries on. Letting out the surplus space in a building owned and used by the assessee is not such an activity falling under clause (c), and the rent received was accordingly outside the deduction.
TaxSphere, “Kottayam Co-operative Land Mortgage Bank v CIT”, https://taxnotice.vittsphere.com/caselaw/case/kottayam-co-op-land-mortgage-bank-v-cit-80p-2-c-activity/ (validity last checked 2026-09-01)
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