TaxTMI 
TaxTMI 
2018 (12) TMI 127
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....lled the TNCS Act, 1983). The appellant filed this appeal under Section 260A of the Income Tax Act, 1961 (for brevity, the IT Act) challenging the correctness of the order passed by the Income Tax Appellate Tribunal, Madras 'D' Bench in ITA.No.220/Mds/2008 dated 19.3.2008 for the assessment year 2005-06. 3. The appeal was admitted on 13.10.2008 on the following substantial question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the income from the sale of public distribution system sales as directed by the Government of Tamil Nadu is not capable of deduction under Section 80P(2) of the Income Tax Act, 1961?" 4. The assessee is in the business of bank....
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....sessment. 6. Aggrieved by the same, the assessee again preferred an appeal to the Tribunal. The Tribunal, by the impugned order, concurred with the view taken by the CIT (A) and pointed out that nothing was placed before it to demonstrate as to how the income earned from the fair price shops could be treated as income from banking activities. Hence, the assessee is before us. 7. Thus, we are called upon to decide as to whether the assessee is entitled for deduction under Section 80P(2) of the IT Act in respect of the income earned from the sale under the PDS. 8. It is not in dispute that the fair price shops were set up pursuant to the direction issued by the Government of Tamil Nadu and communicated through the District Collector.....
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....bers, but also to such other members as the Government may, by Notification, specify. 11. The assessee placed materials before the CIT (A) to show that the fair price shops for sale of fertilizers to the members were opened based on the directives issued by the Government of Tamil Nadu. Therefore, the activity done by the assessee in the sale of items under the PDS to its members would definitely fall within the ambit of a 'credit society' defined under Section 2(13) of the TNCS Act, 1983. 12. The learned Senior Standing Counsel for the Revenue would contend that there are two categories of sales effected by the assessee, one in favour of its members and the other to non members and that the income earned out of sale to non me....
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....lant cannot be said to be an activity, which was not authorized to be done by the society. 16. Our view is strengthened by the decision of the Division Bench of the Bombay High Court in the case of CIT, Nasik Vs. Ahmednagar District Central Cooperative Bank Limited [reported in 2004 (1) Mh. LJ 853]. In the said case, the assessee was a cooperative bank carrying business of banking. Whole amount of profit and gains attributable to the business of banking was not included by the assessee in its income under Section 80P(1) read with Section 80P(2)(a)(i) of the IT Act. During the assessment year in question (1982-83), the assessee earned income by way of commission from the Maharashtra State Electricity Board and from Mula Pravara Coopera....
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....t charged by the banks for hiring out safe deposit vaults to its customers and that in the circumstances, income earned by the assessee bank by way of commission/fees from its customers, being public sector undertakings, would be exempt under Section 80P(2)(a)(i) of the IT Act. Further, the Division Bench pointed out that such view was supported by Section 6(1)(b) of the Banking Regulation Act, 1949, which stated that in addition to the business of banking, a banking company may engage itself as agent for Government or Local Authority or any other person for giving receipts and discharges that is to say for collecting electricity bills from the customers for and on behalf of the Electricity Board and other organizations. 17. The case on ....
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.... advance the case of the Revenue, as factually we found that the assessee herein is entitled to distribute the items under the PDS, as it is one of the allied activities of the society and is bound by the directives of the Government. 20. Apart from that, the definition of 'credit society' is wider in import to include any activity that the Government may, by Notification, specify. Further, we find from By-law No.12(a) that if the society carries on an activity, which is not authorized under the By-laws or with the approval of the Registrar, the society is liable to strike off the Rules and the members engaged in the same are liable to be removed. Furthermore, in terms of Bylaw No.51, the society is entitled to purchase, in bu....