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Issues involved: Interpretation of Section 80P of the Income-tax Act regarding treatment of income from investments made by registered Co-operative Societies providing credit facilities to members.
Summary: The High Court addressed the issue of whether income earned by registered Co-operative Societies from investments made beyond their members should be treated as profits and gains of business attributable to providing credit facilities to members, u/s 80P of the Income-tax Act. The Societies contended that the funds available to them were a mutual fund expanded by mutuality, thus the income should be considered as part of their business profits. However, the Court noted that the investments were made with third parties who contributed to the income, not the members, and therefore, the income could not be considered as profits from providing credit facilities. The Court referred to precedents and held that for income to be considered business profits, it must be derived from investments that are part of the business requirement. As the investments in question were not compulsory and made with third parties, the income earned could not be treated as profits attributable to providing credit facilities. The Court allowed the appeals, set aside the Tribunal and Commissioner of Appeals' judgments, and restored the assessment orders.
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