TMI Blog2004 (11) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... P(2)(c) - Tribunal has rightly interpreted section 80P(2)(c) of the Act and the assessee was entitled to deduction - - - - - Dated:- 19-11-2004 - Judge(s) : R. K. AGARWAL., P. KRISHNA. JUDGMENT The judgment of the court was delivered by P. Krishna J. - The Income-tax Appellate Tribunal, Allahabad, has referred the following question of law, at the instance of the Chief Commissioner of Income-tax for the opinion to this court, under section 256(1) of the Income-tax Act, 1961 (hereinafter referred to as "the Act"): "Whether, on the facts and in the circumstances of the case, the assessee is entitled to deduction under section 80P(2)(c) of the Income-tax Act, 1961?" The facts of the case in brief are as follows: The respondent- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed twenty thousand rupees ..." Section 80P prior to its insertion in the Act was in the form of section 80(i)(c) of the Act. The Supreme Court while interpreting section 81(i)(c), prior to the amendment in 1968 observed that this provision was enacted for promoting the growth of co-operative societies. In such matters the provision should be construed liberally. Reversing the judgment of the High Court that the activity of a society should be divided in two parts- firstly the exempted activities according to clauses (a) to (f) of section 81(i) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the section grants deduction of Rs. 20,000 in calculation of the gross total income of a co-operative society. Clause (c) of section 80P(2) exempts income of co-operative society to the extent mentioned in that section if the profits and gains are attributable to the activities in which the co-operative society is engaged. The question is whether the interest income earned by the assessee-co-operative society on deposits with banks and post offices is "attributable" to the activity of the co-operative society. This court in the case of CIT v. Co-operative Cane Development Union Ltd. [1979] 118 ITR 770 following the judgment of the Supreme Court in Cambay Electric Supply Industrial Co. Ltd. v. CIT [1978] 113 ITR 84 has held that the expres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ffices during the relevant assessment year, when the sugar factory itself was under construction is the income earned by it from investment in fixed deposits is attributable to the activities of the society. The interest income was treated by the Income-tax Officer as the income earned by the assessee. The assessee, being a cooperative society, in our view is entitled for deduction of Rs. 20,000 in its gross total income under section 80P(2)(c) of the Act. The said provision is in the nature of basic exemption granted to a co-operative society. We could lay our hands on a recent judgment of the Punjab and Haryana High Court-Karnal Co-operative Sugar Mills Ltd. v. CIT [1998] 233 ITR 531. This case, though not relied upon by learned standin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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