S. Rajendra Babu, J.—This is a reference under section 256(1) of the Income Tax Act, 1961 (hereinafter referred to as the "Act"), made at the instance of the Department for our opinion on the following question of law :

"Whether, on the facts and in the circumstances of the case, the Tribunal was correct in holding that the amount of Rs. 9,431 paid by the assessee to the Co-operative Education Fund was allowable as a deduction in computing the assessable income."

2. The assessee is a co-operative society registered under the Karnataka Co-operative Societies Act (hereinafter referred to as the "Societies Act"). For the relevant assessment year, the assessee claimed deduction of an amount of Rs. 9,431 being the contribution to the education fund which was made as required under section 57(4)(a) of the Societies Act. The Income Tax Officer disallowed this claim. On appeal, the Appellate Assistant Commissioner allowed the same. On further appeal by the Revenue, the Tribunal confirmed the order of the Appellate Assistant Commissioner.

3. The Tribunal held that the contribution to the education fund was out of the net profits and did not fall in the exclusionary provisions of rul