1988 (6) TMI 19 - HC - Income Tax

Court limits deduction for cooperative society income under section 80P(2)(a)

The High Court of Andhra Pradesh ruled in favor of the Revenue, denying the Anakapalli Cooperative Marketing Society the full deduction claimed under ... Co-operative Society, Special Deduction Issues involved: Interpretation of deduction under section 80P(2)(a) of the Income-tax Act, 1961 for a cooperative society engaged in providing credit facilities and marketing agricultural produce.Summary:The High Court of Andhra Pradesh addressed a question referred by the Income-tax Appellate Tribunal regarding the deduction under section 80P(2)(a) of the Income-tax Act, 1961. The case involved the Anakapalli Cooperative Marketing Society, which claimed deductions for amounts related to marketing agricultural produce and interest on loans given to its members. The Income-tax Officer and Commissioner of Income-tax (Appeals) allowed deductions only for the proportionate net profit from these activities. However, the Income-tax Appellate Tribunal, inspired by a Supreme Court decision, held that the entire gross income should be deducted under section 80P. The court analyzed the relevant sections of the Act, emphasizing the definition of 'gross total income' and the interpretation of deductions under Chapter VI-A. It noted that the Tribunal erred in its understanding and clarified that only the portion of income attributable to the specified activities should be deducted. The court also highlighted the overruling of a previous Supreme Court decision on this matter. Consequently, the court ruled in favor of the Revenue, denying the full deduction claimed by the cooperative society.This judgment clarifies the interpretation of deductions under section 80P(2)(a) for cooperative societies engaged in specific activities, emphasizing the calculation based on total income attributable to those activities.