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TMI Blog2010 (4) TMI 803X X X X Extracts X X X X X X X X Extracts X X X X ..... ineering 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 clause under which deduction was being claimed vis-a-vis income received by it for collective disposal of labour of its members, such deduction was considered as sought under section 80P(2)(a)(vi) of the Act. For its income on account of interest received from credit facilities, the deduction was considered under section 80P(2)(a)(i) of the Act. Neither was allowed by the Assessing Officer and the assessee went in appeal before the learned Commissioner of Income-tax (Appeals) who allowed the claim in full. In the Revenue's further appeal before this Tribunal, this Tribunal by its order dated February 2, 2006 remitted the matter relating to the claim to deduction in respect of its profits and gains from the activity of collective disposal of labour of its members, to the file of the Assessing Officer, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bur 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 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 association, the articles of association, the return of income filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 of employment of its members by executing works with the help of its members or through them. According to him, the assessee was not a co-operative society which was engaged in the business of banking or business of providing credit facilities to its members. Hence, according to him, interest received from its members could not be allowed as deduction under section 80P(2)(a)(i) of the Act. Such deduction visualised under section 80P(2)(a) of the Act were for different categories of societies with respect to profits and gains arising out of business attributable to the activities relatable to such categories. The assessee being not a credit society, but on the other hand only a labour contract society, could not claim any deduction under section 80P(2)(a)(i) of the Act, in respect of its interest income on giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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 two and three. First let us look at the claim of the society for deduction of its interest under section 80P(2)(a)(i). As stipulated by the hon'ble jurisdictional High Court, we have perused the memorandum of association of the assessee-society which is placed at paper book page 1 given, and this run as under : "The objects of the society shall be : (1) to provide or find suitable and profitable employment an employed engineer members ; (2) to undertake the work relating to construction, repair of buildings road canals and similar works ; (3) to act as agent for purchase and distribution of building materials and manufacturing of building materials repaired for the building industries ; (4) to encourage thrift, self-help and co-operation among the members ; and (5) to undertake all other activities to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-help". Despite that, it was held by the hon'ble jurisdictional High Court that income earned by the said society on account of credit facilities given to its members would not be eligible for deduction under section 80P(2)(a)(i) of the Act. That it was the category to which the society belonged which was important, was highlighted by the hon'ble jurisdictional High Court at page 987 of its order which is reproduced hereunder : "The tax relief under section 80P(2)(a)(i) is a grant by Parliament not to a category to income but to a category of the assessee, namely, a co-operative society answering the description of a society engaged in carrying on the business of providing credit facilities to its members. If the society in question does not answer this description, it is not entitled to the relief. For invoking or appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred 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 association, the articles of association, the return of income filed with the Department, the status of business indicated in such returns, etc. This exercise had not been undertaken at all." 11. On the face of the above decisions of the hon'ble apex court the decision of the hon'ble apex court, we are of the opinion that the case of Pondicherry Co-operative Housing Society Ltd. would not aid the assessee in any way. 12. We have already seen the memorandum of association as also looked at the categorisation of the assessee-society, none of which could justify its claim for deduction of its interest income under section 80P(2)(a)(i) of the Act. Coming to the contention of the assessee that pursuing one activity, does not act as a bar for carrying out another activity, we are afraid this is not the issue here. Issue here ..... X X X X Extracts X X X X X X X X Extracts X X X X
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