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1994 (12) TMI 31

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....sons other than its members is exempt from tax under section 80P(2)(c) of the Income-tax Act, 1961? " The assessee is a co-operative housing society. As per bye-law 80A of the bye-laws of the assessee-society, certain shops constructed by the assessee-society were not to be sold but were to be let out on leave and licence basis to help maintenance of the assessee-society. In the assessment years 1976-77, 1977-78 and 1978-79, the assessee-society did derive income from letting of shops to persons other than its members. In the course of the assessment proceedings for the said assessment years, the assessee-society contended that its income derived from letting of the shops to persons other than its members was exempt from tax under section ....

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....eof. Section 80P allows a straight deduction in the computation of the total income of a co-operative society in respect of incomes and to the extent as mentioned therein. In order to earn exemption under section 80P, a co-operative society must prove that it had engaged itself in carrying on any of the several businesses referred to in sub-section (2) thereof. The business must have a direct or proximate connection with or nexus to the earning in order that such assessee-society may enjoy the exemption. Section 80P has obviously been enacted with a view to encourage and promote growth of the co-operative sector in the economic life of the country. There are different heads of exemption enumerated in the section. Each is a distinct and inde....

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.... also constructed house property and derived rental income therefrom. The Gauhati High Court, after considering the submissions of learned counsel appearing therein, held that the expression "profits and gains" in clause (c) of sub-section (2) of section 80P is not confined to "profits and gains of business" as is the case under clause (a). It further held that income derived by the society by way of rent from the house property constructed would be profits and gains attributable to the activity of constructing and letting out the house and that the rent received by it from letting out the house property was profit or gain attributable to the activity of letting out the house. In the instant case, the letting out of the shops by the assesse....