1978 (9) TMI 19 - HC - Income Tax

Income from printing press & service charges not exempt under section 80P(2)(a)(i)

The court ruled against the assessee, holding that income from the printing press and service charges for pumping sets were not exempt under section ... Exemption under section 80P(2)(a)(i) - business of banking - providing credit facilities - selling goods on credit - membership of a co-operative society - definition of 'member' under the U.P. Co-operative Societies Act, 1965Exemption under section 80P(2)(a)(i) - selling goods on credit - Whether income from the printing press was exempt under s. 80P(2)(a)(i). - HELD THAT: - The Court followed its prior decision in Addl. CIT v. U. P. Co-operative Cane Union and held that income from a printing press is income from the business of purchase and sale of goods and not income arising from a business of providing credit facilities or banking. The expression 'providing credit facilities' must be read in the light of 'business of banking' and denotes activities whose chief source is credit operations. Selling goods on credit in the course of a trading business does not amount to carrying on the business of providing credit facilities so as to attract the exemption. Applying that principle, the Court held that the printing press income did not fall within s. 80P(2)(a)(i).Printing press income is not exempt under s. 80P(2)(a)(i).Exemption under section 80P(2)(a)(i) - providing credit facilities - business of banking - definition of 'member' under the U.P. Co-operative Societies Act, 1965 - membership of a co-operative society - Whether income from service charges for supply of pumping sets was exempt under s. 80P(2)(a)(i). - HELD THAT: - The Tribunal found and the Court accepted that the Federation undertook responsibility for payment, procured or provided loans, and guaranteed payment to the supplier under the agreement; the service charges were paid for those services. Interpreting 'providing credit facilities' in the light of 'business of banking', the Court held that lending services in the form of guaranteeing payments and procuring/arranging loans amounts to providing credit facilities. However, the statutory definition of 'member' in the U.P. Co-operative Societies Act, 1965 distinguishes between an individual member of a member-society and the member-society itself; members of a member-society do not ipso facto become members of the parent society. The cane-growers were members of a member-society and not members of the assessee-society. Since s. 80P(2)(a)(i) requires that the co-operative society provide such facilities to its members, the condition was not satisfied. Consequently, although the activity qualified as providing credit facilities, the persons for whose benefit it was provided were not members of the assessee-society within the statutory meaning, and exemption could not be claimed.Service-charge income arose from providing credit facilities but was not exempt because the cane-growers were not members of the assessee-society as defined by the Co-operative Societies Act.Final Conclusion: The referred question is answered in the negative: the printing-press income is not exempt under s. 80P(2)(a)(i), and the service-charge income, though arising from activities amounting to providing credit facilities, is not exempt because the cane-growers were not members of the assessee-society; result against the assessee and in favour of the department, with costs to the Commissioner. Issues involved: Interpretation of exemption u/s 80P(2)(a)(i) of the Income-tax Act, 1961 for income from printing press and service charges for the supply of pumping sets.For the income derived from the printing press, the court held that it was not exempt from tax under section 80P(2)(a)(i) of the Act, based on a previous decision regarding a similar provision (s. 81(i)(a)) which was deleted and replaced by the current section. The court emphasized that income exempted should arise from the business of providing credit facilities, not merely selling goods on credit.Regarding the income from service charges for the supply of pumping sets, the Tribunal found that the assessee-society provided credit facilities to the cane-growers, who were members of a member-society of the assessee. The Tribunal concluded that the service charges were exempt under s. 80P(2)(a)(i) as the society had derived income from providing credit facilities to its members.However, the court disagreed with the Tribunal's interpretation, stating that the cane-growers were not members of the assessee-society as per the Co-operative Societies Act. The court highlighted the specific definition of 'member' under the Act and concluded that the conditions of s. 80P(2)(a)(i) were not met, thus the income from service charges was not exempt from tax under the said section.In conclusion, the court ruled against the assessee, holding that both the income from the printing press and service charges for pumping sets were not exempt under section 80P(2)(a)(i) of the Income-tax Act, 1961. The Commissioner was awarded costs amounting to Rs. 200.