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Issues Involved:
The judgment addresses the issue of whether the income of an assessee-co-operative society was exempt u/s 80P(2)(a)(i) of the Income-tax Act, 1961, based on the nature of activities carried out by the society. Details of the Judgment: The assessee, a co-operative society providing consumption goods on credit to its members, claimed exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Income Tax Officer (ITO) disallowed the claim, stating that merely selling goods on credit does not constitute providing credit facilities. The Appellate Assistant Commissioner (AAC) disagreed with the ITO and allowed the exemption. However, the Income-tax Appellate Tribunal overturned the AAC's decision, leading to the reference to the High Court. The assessee argued that selling goods on credit should be considered as providing credit facilities to its members. The High Court rejected the assessee's argument, emphasizing that section 80P(2)(a)(i) refers to co-operative societies engaged in banking or providing credit facilities. The court highlighted the distinction between credit societies and consumer societies, stating that the provision of credit facilities involves more than just selling goods on credit. Referring to previous case law, the court reiterated that selling goods on credit does not equate to providing credit facilities, as in the case of a consumer co-operative society. The court cited a previous decision where a co-operative society selling goods on credit was not considered to be providing credit facilities. It acknowledged a broader interpretation of providing credit facilities but maintained that selling goods on credit does not fall within this definition. The court concluded that the assessee was not entitled to the exemption under section 80P(2)(a)(i) as a co-operative society engaged in providing credit facilities to its members. The judgment ruled against the assessee, who was directed to pay the costs of the department along with counsel fees. In conclusion, the High Court clarified the interpretation of section 80P(2)(a)(i) and established that selling goods on credit does not qualify as providing credit facilities, especially for a consumer co-operative society. The judgment reaffirmed the distinction between credit societies and consumer societies in the context of exemption under the Income-tax Act, 1961.
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