TaxTMI 
TaxTMI 
2002 (10) TMI 89
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....The assessee-society was formed with the main object of organising increase in sugarcane cultivation and purchase and sale of sugarcane crops at profitable price, expeditious supply of sugarcane to mills and ensuring prompt payment to the farmers from the mills. One of its object is to arrange for funds for the fulfilment of these objects which stands incorporated in Pratiman Upvidhiyan of Sahkari Ganna Vikas Samitiyan published by the Registrar, Sugarcane Co-operative Societies, which has been approved by the Government of Uttar Pradesh which has been marked as annexure A and directed to form part of the statement of the case. In the course of the proceedings for assessment, it was claimed before the Income-tax Officer that the interest received by the assessee-society from its members was also entitled to exemption under section 80P but the Income-tax Officer held that since the business of the society was not banking or providing credit facilities to its members exemption on interest received from them is not entitled to exemption. The assessee-society went up in appeal before the Commissioner of Income-tax (Appeals). The appellate authority agreed with the view of the Income-ta....
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....tion 80P(2)(a)(i) it was not permissible to make a break-up of the income of the society as so much derived from the provisions of credit facilities and so much from other income, if the society itself, in its true nature and object, is not engaged in the business of providing credit facilities. (ii) Addl. CIT v. U. P. Co-operative Cane Union [1978] 114 ITR 70 (All) in which it was held that the expression "providing credit facilities" takes it colour from the activity of banking and that it was not necessary that activities of the co-operative society from which it draws income must be the chief source of income. (iii) H. E. H. Nizam's Religious Endowment Trust v. CIT [1966] 59 ITR 582 (SC); AIR 1966 SC 1007 wherein it was held to the effect that the burden lay upon the assessee to prove for granting deduction that the income falls within the four comers of the provision granting deduction under Chapter VI-A of the Income-tax Act containing section 80P. (iv) CIT v. Cellulose Products of India Ltd. [1991] 192 ITR 155 (SC), wherein it was held that only where there is genuine doubt about the interpretation of a fiscal statute or where two opinions are capable of being f....
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...., the whole of the following types of income will equally be allowed as deduction: (i) Interest or dividends derived by a co-operative society from its investments with any other co-operative society; (ii) Income derived by the co-operative society from the letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities. Attributable to such activities: The expression "attributable to such activities" has been used in clauses (a) and (c) of sub-section (2) of this section. This expression must be understood in a broad sense and it cannot be equated with the expression "derived from". Therefore, interest from securities held by a co-operative bank as its liquid assets as required by the Banking Regulation Act and the directions of the Reserve Bank of India and the amounts received as subsidies from the Government as inducement for opening branches and as compensation in the matter of grant of loans to the poorer sections at lower rates of interest would definitely be attributable to the banking business. Similarly, the income earned by a co-operative bank by way of commission and brokerage by dealing in bills ....
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....Both learned counsel took us to the objects of such co-operative societies printed at page 3 under item No. 4. Paragraph 4 of this booklet prescribes its main and subsidiary aims. Paragraph 4 narrates its seven main objects. Paragraph 4A(4) appears to be most relevant main object for settling the controversy which has cropped up between the parties, the English translation of which as agreed to by both learned counsel, is as follows: "(4) Providing better quality of seeds of sugarcane, manure and fertilizer, pesticides, agricultural implements, irrigation equipments and arrangement of other articles for agricultural purposes and to provide or to arrange credit facilities for this purpose to its members." Having given our most anxious thought to the aforementioned main object enumerated as above as also other six main objects and Chapter XIII which contains the heading "loan" which is pages at 33 to 36 of the booklet it is clear to us that the assessee-co-operative society would lend to its members or would arrange finance to its members through someone else's agency to enable them to purchase good seeds of sugarcane, fertilizers, etc., and that loans will not be ....