Co-operative society exemption denied where credit facilities were arranged for non-members rather than the society's own members.

A co-operative society's exemption claim on service charges failed because the credit-related activity was not provided to its own members. Cane growers were members of a union that itself was a member of the society, but they were not members of the assessee society. Applying the binding view on the same facts as the earlier year, the statutory requirement under section 80P(2)(a)(i) was not met because the facilities were extended to non-members. The service-charge income was therefore not exempt, and the issue was decided against the assessee and in favour of the Revenue.

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Issues: Whether the assessee-co-operative society was entitled to exemption under section 80P(2)(a)(i) of the Income-tax Act, 1961, in respect of service charges received for arranging credit facilities for cane growers for purchase of pump sets, when the cane growers were not members of the assessee society.

Analysis: The claim for exemption depended on whether the activity amounted to providing credit facilities to the members of the assessee-society. The cane growers were members of a union which in turn was a member of the assessee, but they were not members of the assessee itself. On the same facts as the earlier year, the binding view was that such growers could not be treated as members of the assessee society, and credit facilities extended to them did not satisfy the statutory requirement of being provided to members of the society.

Conclusion: The income from service charges was not exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961, and the answer was against the assessee and in favour of the Revenue.

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