1. These appeals by the department relate to the assessment years 1978-79 and 1979-80, for which the previous year ended on 30-6-1977 and 30-6-1978, respectively.
2. The common ground taken by the department in both the appeals is that the AAC erred in allowing a deduction of Rs. 20,000 under Section 80P(2)(c) of the Income-tax Act, 1961 ('the Act').
3. The assessee is a co-operative society engaged in carrying on the business of banking by providing credit facilities to its members. The assessee constructed a building to house the bank and the administrative offices. Surplus space in the building was let out. The assessee returned a net amount of Rs. 29,139 for the assessment year 1978-79 and Rs. 20,564 for the assessment year 1979-80 by way of income from property and claimed out of the same a deduction of Rs. 20,000 for each assessment year under Section 80P(2)(c).
4. Section 80P relates to deduction in respect of income of co-operative societies. Under Clause (a) of Sub-section (2) profits and gains attributable to the activities enumerated in the clause are totally exempted. Similarly, under Clause (b) the profits and gains of business attributable to the supply of milk in certain cases are totally exempted. Then comes Clause (c) which reads thus: (c) in the case of a co-operative society engaged in activities other than those specified in Clause (a) or Clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed twenty thousand rupees; 5. The ITO held that the deduction under Clause (c) is admissible only in the case of a co-operative society engaged in activities other than those specified in Clause (a) or (b) and that as the assessee has already claimed exemption under Clause (a) with regard to its income from the banking activity, it is not entitled to claim any further deduction under Clause (c). The AAC held that the deduction under Clause (c) is in addition to the deductions allowable under Clauses (a) and (b) and that the ITO was not, therefore, justified in refusing the deduction. The contentions advanced by the department in the grounds of appeal and urged before us are to the following effect: Clause (c) of Sub-section (2) of Section 80P refers to 'profits and gains', which predicates a business activity. It will not cover income from property.
The words 'profits and gains' have been used in the Act only with reference to Sections 28 to 43A of the Act which deal with income from business. Sections 22 to 24 of the Act which deal with the income from house property do not use the expression 'profits and gains' and only use the expression 'income'. Further the letting out of portion of the building of the assessee will not amount to an activity. Clauses (d), (e) and (f) of Sub-section (2) of Section 80P use the word 'income' with reference to income arising from dividends, letting out of godowns, interest on securities, etc. This clearly indicates that the words 'profits and gains' used in Clauses (a) to (c) related to an income from business activity.
6. As against this, it is contended by the learned representative for the assessee that although it is a fact that the words 'profits and gains' have been used in Clause (c), they are used in conjunction with the word 'activity' and that this clause does not use the expression 'profits and gains of business' as in Clauses (a) and (b). It was, therefore, argued that it is not correct to say that Clause (c) refers to only income from business activity. On the other hand, according to the learned representative for the assessee, it relates to all kinds of activities and the letting out of the surplus space in the building is one of the activities of the assessee. In this connection, the learned representative relied upon the decision of the Allahabad High Court in the case of CIT v. Co-operative Cane Development Union Ltd.  118 ITR 770. In that case, the assessee-co-operative society was carrying on the activity of supplying sugarcane. A portion of the profits was invested by the society in the Government securities. The assessee claimed exemption under Clause (c) with regard to the interest received on the investments. The assessee's claim was upheld by the Allahabad High Court. It was held that the expression 'attributable to' is much wider than the expression 'derived from' and that it covers the receipts from sources other than the actual conduct of the business of the assessee.
7. We have carefully considered the matter. In our opinion, the decision of the Allahabad High Court in the case of Co-operative Cane Development Union Ltd. (supra), relied upon by the learned representative for the assessee, is not applicable to the facts of the present case. The supply of sugarcane by the society was clearly an activity. The only dispute was whether the interest received from the investment of a portion of the profit gained by the activity can be brought under Clause (c) for claiming exemption. It was in this connection that it was held that the words 'attributable to' are much wider than the expression 'derived from'. The ratio of the decision is that although the interest income is not actually derived from the activity of supplying sugarcane, it is attributable to the activity of supplying sugarcane. In the present case, even assuming that the letting out of the surplus space by the assessee is an activity, we are unable to hold that the proceeds therefrom can be called 'profits and gains'. In the case before the Allahabad High Court referred to above, the activity was supplying sugarcane and it was clear that the receipts thereof will definitely be profits and gains. The same cannot be said with regard to rent received from letting out building. Clauses (a) and (b) clearly refer to 'profits and gains of business'. Clause (c) does not use the word 'business'. But it refers to 'profits and gains attributable to such activities'. The expression 'such activities' refers to 'activities other than those specified in Clause (a) or Clause (b)'. As already stated, Clauses (a) and (b) specifically refer to business activity. In our view, the rule of construction of ejusdem generis applies to the construction of Clause (c). The 'other activities' referred to in Clause (c) must be some activity which results in profits and gains. As rightly pointed out by the learned departmental representative, the words 'profits and gains' have a definite connotation in income-tax law. They have been generally used in connection with profits and gains of business or profession dealt with by Sections 28 to 44D of the Act. With regard to income from house property dealt with by Sections 22 to 27, the expression used is 'income' and not 'profits and gains'. In fact, the words 'profits and gains' seem to be totally inappropriate in describing the income derived from letting out property unless the very business of the assessee happens to be letting out properties. The position is strengthened by the other provisions in Section 80P itself. Clauses (d), (e) and (f) which deal with income from interest or dividends, income from letting of godowns or warehouses and income from securities and house property, the word used is 'income' and not 'profits and gains'. The closing portion of Clause (/) furnishes a complete answer to the controversy. The reference in the closing portion is to 'any income from house property chargeable under Section 22'. Section 80P, therefore takes notice of income from house property. It not only uses the word 'income' in connection with the same but specifically deal with the same under Clause (f). Income from house property will be exempt only where the gross total income of the society does not exceed Rs. 20,000. In view of this, we are of the view that the income of the assessee from letting out portion of the building is only income from house property and that it cannot be termed as profits and gains of an activity contemplated by Clause (c).
8. We are also unable to accept the alternative contention raised for the first time in this appeal by the learned representative for the assessee that the letting out of surplus space should be treated as a business activity falling under Clause (a) of Sub-section (2) of Section 80P and that the income therefrom is profits and gains of business.
9. We may also state that the view taken by the ITO that the claim of the assessee under Clause (c) has to be rejected merely because the assessee has already enjoyed the exemption under Clause (a) is not sustainable as Clause (c) clearly indicates that the claim under the clause can be independently of or in addition to claims falling under Clauses (a) and (b). But the claim of the assessee has to fail for the reason given above.
10. In the result, we allow the appeals and hold that the assessee is not entitled to the exemption claimed.