2007 (2) TMI 216 - HC - Income Tax

Assessee is a co-operative society engaged in the business of civil construction and repair works - assessee advanced loans to its members and received interest therefrom claim for deduction u/s 80P(2)(a)(i) - Tribunal was right in holding that the assessee who is engaged in the business of civil construction and repair works is eligible for the benefit of section 80P(2) (a) (i) in respect of the interest received from members

Summary

Issues:
- Interpretation of eligibility for deduction under section 80P(2)(a)(i) of the Income-tax Act for a co-operative society engaged in civil construction and repair works.
- Determination of whether the co-operative society is eligible for exemption under section 80P(2)(a)(i) despite not being engaged in banking or credit facilities provision.

Analysis:
The High Court of Madras addressed the above issues in a judgment delivered by P. D. Dinakaran J. The case involved appeals by the Revenue against the Income-tax Appellate Tribunal's order concerning a co-operative society engaged in civil construction and repair works. The society had advanced loans to its members and claimed deduction under section 80P(2)(a)(i) of the Income-tax Act. The Assessing Officer initially denied the claim, stating that the society's primary objective was not akin to a credit society engaged in banking activities. However, the Commissioner of Income-tax (Appeals) allowed the appeals, a decision upheld by the Tribunal.

The Revenue raised substantial questions of law challenging the Tribunal's decision. The questions pertained to whether the society, despite its business nature, was eligible for the benefits under section 80P(2)(a)(i) for interest received from members, and whether it qualified for exemption under the same section without being a co-operative society involved in banking or credit provision. The court noted that a previous judgment in a similar case had ruled in favor of the taxpayer, stating that a society running a sugar mill and providing loans to members was entitled to exemption under section 80P(2)(a)(i).

The court, based on the precedent and settled law, concluded that the respondent co-operative society was indeed eligible for the benefits under section 80P(2)(a)(i) for interest received from members. Consequently, as no substantial question of law was found to merit consideration, the appeals by the Revenue were dismissed. The judgment reaffirmed the eligibility of the co-operative society for the tax benefits in question, aligning with the established legal position on the matter.