TMI Blog2005 (5) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... interest received by the assessee from monies advanced to its members. 2. The brief facts of the case are that the assessee is a co-operative marketing society which has claimed deduction under section 80P(2)( a )( i ) of the Income-tax Act on the interest received from its Members. The Assessing Officer disallowed the claim on the ground that the society is engaged in marketing of finished goods of the assessee/members and the assessee is not a credit society. The assessee has advanced money against finished goods manufactured by its members and interest was received on such advance which is incidental to the main marketing activities of the assessee. However, on appeal, the CIT (Appeals) allowed the claim of the assessee for the rea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject clause of the Bye law of the society. The society was termed as service society by the Registrar of Co-operative Societies. He drew our attention to the amendment which reads as follows : "( i ) With effect from 5-5-1994 one of the main objectives of the society is providing credit facility. The relevant portions of the amended bye law No. 2 runs as under : Preamble 2 : The object of the society is the improvement of handloom industry and of the economic condition of the weavers residing in the area of operations mentioned in bye law No. 1. ( a )Hence, the main objects of the society shall be, 1.To provide credit facilities to its members, ( i.e. ) to advance secured loans to members on the terms and conditions fixed by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ale consideration of the goods intended for sale on deposit of finished goods with the assessee. But, during the assessment years under consi-deration, the assessee instead of advancing money against deposit of finished goods for sale, advanced money for purchase of raw materials out of which the assessee has produced silk sarees. 6. We have heard the rival submissions and perused the material on record. Section 80P(2)( a )( i ) of the Income-tax Act entitles deduction to the co-operative societies which are engaged in carrying on business of banking or providing credit facilities to its members. The tax relief under this section is granted by the Parliament not to a specific category of income but to the category of the assessee, viz ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or other credit facilities to its members. It does not include any society whose primary object is something other than providing loan or other credit facilities. The true nature and object of the society is the predominant factor to decide the allowability of this deduction. The assessee cannot become entitled to deduction under this section without having the primary object, but having only the secondary object of advancing loans for the purchase of raw materials to its members. This view is supported by the judgment of Hon ble Supreme Court in the case of Madras Auto Rickshaw Drivers Co-operative Society v. CIT [2001] 249 ITR 330 wherein the judgment of the Hon ble Jurisdictional High Court in the above case CIT v. Madras Autoric ..... X X X X Extracts X X X X X X X X Extracts X X X X
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