Satish Kumar Mittal, J.

1. The instant appeal filed by the Revenue under Section 260 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), is directed against the order dated July 31, 2006, passed by the Income-tax Appellate Tribunal, Chandigarh Bench "B", Chandigarh (hereinafter referred to as "the HAT"), in I. T. A. No. 550/Chandi/2005 in the case of the respondent - assessee for the assessment year 1999-2000 by raising the following substantial question of law:

Whether, on the facts and circumstances of the case, the honble Income-tax Appellate Tribunal was right in law in holding that income earned from banking business with nominal members is eligible for deduction under Section (2)(a)(i) of the Income-tax Act, 1961?

2. The brief facts of the case are that the respondent-co-operative bank (hereinafter referred to as "the assessee"), is a registered society under the Punjab Co-operative Societies Act, 1961 (hereinafter referred to as "the Societies Act"). The assessee is a co-operative society carrying on the business of banking and extending the credit facilities to its members and nominal members. The assessee being carrying on the business of banking, c