TMI Blog2002 (10) TMI 89X X X X Extracts X X X X X X X X Extracts X X X X ..... and the provisions of section 80P of the Income-tax Act, 1961, the Appellate Tribunal was justified in holding that the interest earned by the assessee-co-operative society from its members was covered by the provisions of section 80P(2)(a)(i) of the Income tax Act, 1961, and, therefore, exempt from tax?" This reference relates to the assessment years 1975-76 and 1976-77 pertaining to Krishak Sahkari Ganna Samiti Ltd., Lakhimpur Kheri. The statement of the case is as follows: The assessee-society was formed with the main object of organising increase in sugarcane cultivation and purchase and sale of sugarcane crops at profitable price, expeditious supply of sugarcane to mills and ensuring prompt payment to the farmers from the mills. One of its object is to arrange for funds for the fulfilment of these objects which stands incorporated in Pratiman Upvidhiyan of Sahkari Ganna Vikas Samitiyan published by the Registrar, Sugarcane Co-operative Societies, which has been approved by the Government of Uttar Pradesh which has been marked as annexure A and directed to form part of the statement of the case. In the course of the proceedings for assessment, it was claimed before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... edit facilities" will draw its colour from the word "business of banking" mentioned in the earlier part meaning thereby that only those co-operative societies whose chief or main activity is to provide credit facilities to its members only would be entitled for deduction. Reliance was placed on the following decisions: (i) CIT v. Madras Autorickshaw Drivers Co-operative Society Ltd. [1983] 143 ITR 981 (Mad) at page 987, wherein it was observed that for invoking or applying section 80P(2)(a)(i) it was not permissible to make a break-up of the income of the society as so much derived from the provisions of credit facilities and so much from other income, if the society itself, in its true nature and object, is not engaged in the business of providing credit facilities. (ii) Addl. CIT v. U. P. Co-operative Cane Union [1978] 114 ITR 70 (All) in which it was held that the expression "providing credit facilities" takes it colour from the activity of banking and that it was not necessary that activities of the co-operative society from which it draws income must be the chief source of income. (iii) H. E. H. Nizam's Religious Endowment Trust v. CIT [1966] 59 ITR 582 (SC); AIR 1966 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny one or more of the activities enumerated in seven sub-clauses of clause (a) of sub-section (2) will be allowed as deduction. Similarly, the whole amount of profits and gains arising to a primary co-operative society from the supply of milk, oil-seeds, fruits or vegetables raised or grown by its members to a federal co-operative society, the Government or a local authority, a Government company or a corporation will also be allowed as deduction. Likewise, the whole of the following types of income will equally be allowed as deduction: (i) Interest or dividends derived by a co-operative society from its investments with any other co-operative society; (ii) Income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. Attributable to such activities: The expression "attributable to such activities" has been used in clauses (a) and (c) of sub-section (2) of this section. This expression must be understood in a broad sense and it cannot be equated with the expression "derived from". Therefore, interest from securities held by a co-operative bank as its liquid assets as required by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ane Development Union Ltd. [1979] 118 ITR 770. He too, submitted his arguments in writing which are on the record. We have carefully perused the backdrop of the enactment and the decisions relied upon by both learned counsel and the booklet "Sahkari Ganna Vikas Samitiyan Ki Pratiman Upvidhiyan" approved by the U. P. Government and published by the Registrar, Sugarcane Co-operative Societies, which is in Hindi. Both learned counsel took us to the objects of such co-operative societies printed at page 3 under item No. 4. Paragraph 4 of this booklet prescribes its main and subsidiary aims. Paragraph 4 narrates its seven main objects. Paragraph 4A(4) appears to be most relevant main object for settling the controversy which has cropped up between the parties, the English translation of which as agreed to by both learned counsel, is as follows: "(4) Providing better quality of seeds of sugarcane, manure and fertilizer, pesticides, agricultural implements, irrigation equipments and arrangement of other articles for agricultural purposes and to provide or to arrange credit facilities for this purpose to its members." Having given our most anxious thought to the aforementioned ..... X X X X Extracts X X X X X X X X Extracts X X X X
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