1. The assessee is a co-operative society doing banking business. As part of its business activity the assessee was also conducting Kuris-Chit Funds-since about the year 1959 or so. The income derived from the conduct of the chit funds was not being subjected to tax till 1969-70. For the assessment year 1969-70 the Income tax Officer took the view that the assessee's income from the chit fund business did not fall within the scope of S.80P (2)(a)(i) of the Income-tax Act, 1961 (hereinafter referred to as the Act) and subjected the said income to tax rejecting the assessee's claim for deduction under the aforesaid provision. The grounds which weighed with the Income-tax Officer for disallowing the assessee's claim for deduction under S.80P (2) (a) (i) (a) (i) were that the business of conducting the chit fund was not one intended for providing credit facilities but was only in the nature of a saving scheme and that there was no restriction that only members of the society could become subscribers in the chit fund.

2. The assessee preferred an appeal to the Appellate Assistant Commissioner of Income-tax, Ernakulam contending that the disallowance of his claim for deduction