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TMI Blog1992 (10) TMI 28X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the interest of Rs. 17,292 received by the co-operative society from 13 members and from bank on outstanding balances could qualify for exemption under section 80P(2)(a)(i) of the Act ?" The facts of the case are that during the course of examination of the books of account of the assessee, the Income-tax Officer found that the interest paid by the members on the closing balance as at the end of the accounting year was Rs. 15,167 and the assessee has also received interest from the bank of Rs. 2,125. The Income-tax Officer came to the conclusion that the said amount of Rs. 17,292 does not qualify for exemption as provided under section 80P(2)(a)(i) of the Income-tax Act, 1961. According to the Income-tax Officer, interest fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... connected with the process of taking over from the agricultural producer-members and handing over marketable commodities to the purchaser and all the intermediate processes connected with the marketing of the agricultural produce of the members. It was held that the term "marketing" cannot be restricted only to buying and selling activity. These judgments were approved by the Supreme Court in the case reported in Broach District Co-operative Cotton Sales, Ginning and Pressing Society Ltd. v. CIT [1989] 177 ITR 418. From a bare perusal of the facts of this case, it would be evident that the dispute there was with regard to the interpretation of section 80P(2)(a)(iii) and not of section 80P(2)(a)(i) and, therefore, the interest charges, godo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the provisions of section 80P(2)(a)(i). The provisions of section 80P(2)(a)(i) are as under: "Section 80P. Deduction in respect of income of co-operative societies.- . (2) The sums referred to in sub-section (1) shall be the following, namely : (a) in the case of a co-operative society engaged in (i) carrying on the business of banking or providing credit facilities to its members, or . . . " The purpose of enactment of section 80P was to encourage and promote growth of the co-operative sector in the economic life of the country. Construction with regard to exemption has to be taken separately when it has to be examined as to whether a particular income falls within one of the various heads of exemption as provided under section 80P(2) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the members being effected in the form of hire purchase agreement, which could not be considered to be offering a credit facility by the society to the members concerned and, therefore, the same was held not entitled to exemption. The Kerala High Court in Kerala Co-operative Consumers Federation Ltd. v. CIT [1988] 170 ITR 455, has also interpreted the words "providing credit facilities" and it was held that it should be construed as similar to, or akin to "carrying on the business of banking", the preceding clause in the same sub-section. It was held that every word in a statute should be construed in the context in which it occurs in order to discover its appropriate meaning. The Madras High Court in Rodier Mill Employees' Co-operative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amount to providing credit facilities in the nature of the business of banking so as to amount to carrying on the business of banking or providing credit facilities to its members. As a matter of fact this clause is meant to cover societies which are carrying on the business of banking and in the course of their business are providing credit facilities to its members. From a perusal of the various decisions and on the basis of the interpretation of the provisions of section 80P(2)(a)(i) of the Act, we are of the view that the Income-tax Appellate Tribunal was not justified in coming to the conclusion that the interest on the outstanding balances in respect of supplies of goods would qualify for exemption under section 80P(2)(a)(i) of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X
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