TMI Blog2010 (4) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... Abraham P. George, Accountant Member - In all these appeals of the Revenue, the issue involved is eligibility of the assessee to claim deduction under section 80P(2)(a)(i) of the Income-tax Act, 1961 (in short, the Act) in respect of interest received by it from credit facilities extended to the members of the assessee, which is a co-operative society. Though the Assessing Officer did not allow such claim, the learned Commissioner of Income-tax (Appeals) in the assessee's appeals for all the years held it to be eligible for claiming such deduction. 2. The short facts apropos are that the assessee is a co-operative society, registered under the Tamil Nadu Co-operative Societies Act, 1961 as a labour contract society. The members of the society were unemployed graduates/diploma holders in engineering and the society was taking up engineering works from the Public Works Department. It had claimed deduction under section 80P of the Act for all these years in respect of its profits and gains from activity of collective disposal of labour of its members and also for interest received by it on providing credit facilities to its members. Though, the assessee did not specify the cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that with regard to the specific question of exemption, the Tribunal had not examined the memorandum of association of each co-operative society to prove that the respective societies have engaged themselves in carrying on any of the several businesses referred to in sub-section (2) of section 80P of the Income-tax Act. The relevant paragraphs are as follows (page 402) : '18. Coming to the second question, namely, whether the assessee was entitled to exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961 ("the 1961 Act"), in respect of interest received from the members of the society, we find that none of the authorities below, including the High Court, have examined the memorandum of association filed by Salem Co-operative Sugar Mills Ltd., Madurantakam Co-operative Sugar Mills Ltd., Ambur Co-operative Sugar Mills Ltd., Dharmapuri District Co-operative Sugar Mills Ltd., Vellore Co-operative Sugar Mills Ltd., Attur Agricultural Producers Co-operative Society Ltd. and Modern Engineers Construction Co-operative Society Ltd. Under section 80P(1), deduction in respect of income of co-operative societies is provided for. Under section 80P(1) where the gross total income of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional High Court on the matter as mentioned supra. 5. When the appeals were taken up for hearing, learned counsel for the Revenue submitted that there was another decision of the hon'ble Apex Court in the assessee's own case, viz., CIT v. Modern Eng. Construction Co-operative Society Ltd. [2008] 306 ITR 10/174 Taxman 419 (SC) wherein the issue relating to the claim of deduction of interest, made by the assessee under section 80P(2)(a)(i) of the Act was adjudicated and the matter remitted back to the hon'ble jurisdictional High Court for following the decision of the hon'ble Apex Court in the case of Madras Auto Rickshaw Drivers' Co-operative Society v. CIT [2001] 117 Taxman 370/249 ITR 330. Therefore, according to him, it was necessary for this Tribunal to consider the decision of the hon'ble apex court in Madras Autorickshaw Drivers' Co-operative Society also for deciding the issue now. 6. Adverting to the merits, learned counsel for the Revenue submitted that the assessee was admittedly a labour contract society. As per rule 14 of the Tamil Nadu Co-operative Societies Rules, 1988, a labour contract society was one which had as its principal object the securing and provision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o mentioned that carrying on anyone of the activities as mentioned under section 80P(2)(a) did not act as bar for carrying out any other activity mentioned therein and, therefore, just because the assessee was a engineering contract society, it was wrong to presume that no deduction could be allowed to it for interest on credit facilities given to its members. Learned counsel also stated that the members were unemployed engineers/diploma holders and credits given to them was only for the purpose of helping them get employment and therefore, such credit facilities became one of the main activity of the society. Learned counsel relied on the decision of the hon'ble jurisdictional High Court in the case of CIT v. Pondicherry Co-operative Housing Society Ltd. [1991] 188 ITR 671 (Mad.) in support of his contention. Further, it was argued that the appeal of the Department itself was not maintainable since intention of the Assessing Officer was not to disallow the deduction under section 80P(2)(a)(i) of the Act. 8. We have heard the rival submissions and perused the orders. The directions given by the hon'ble apex court and hon'ble jurisdictional High Court have been reproduced at paras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to relief under section 80P(2)(a)(i) of the Act. The hon'ble apex court had affirmed the decision of the hon'ble jurisdictional High Court in CIT v. Madras Autorickshaw Drivers' Co-operative Society Ltd. [1983] 143 ITR 981 (Mad). The hon'ble jurisdictional High Court in the latter case, while dealing with the issue regarding claim of relief under section 80P(2)(a)(i) of the Act, held that unless a co-operative society answered the description of a society engaged in carrying on the business of providing credit facilities to its members, it was not entitled for deduction under section 80P(2)(a)(i) of the Act. Their Lordships noted that the main object of the society in that case was to promote the economic interest of the members of the society by purchasing autorickshaws, vehicles and selling them on hire purchase terms to the members. The stress of the argument of the assessee there was that the term "promotion of economic interest" of the members, as it appeared in its main object, would cover income of the society derived from providing credit facilities to its members. The bye-law of the said society also declared its subsidiary object to be "to encourage thrift and self-he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tive Sugar Mills Ltd., Madurantakam Co-operative Sugar Mills Ltd., Ambur Co-operative Sugar Mills Ltd., Dharampuri District Co-operative Sugar Mills Ltd., Vellore Co-operative Sugar Mills Ltd., Attur Agricultural Producers Co-operative Society Ltd. and Modern Engineers Construction Co-operative Society Ltd. Under section 80P(1) deduction in respect of income of co-operative societies is provided for. Under section 80P(1), where the gross total income of a co-operative society includes any income referred to in sub-section (2) then the sums specified in sub-section (2) shall be deducted from the gross total income to arrive at the total income of the assessee-society. In order to earn exemption under section 80P(2) a co-operative society must prove that it had engaged itself in carrying on any of the several businesses referred to in sub-section (2). In that connection, it is important to note that under sub-section (2), in the context of co-operative society, Parliament has stipulated that the society must be engaged in carrying on the business of banking or providing credit facilities to its members. Therefore, in each case, the Tribunal was required to examine the memorandum of a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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