MALWA MILLS KARAMCHARI PARASPAR SAHAKARI SANSTHA LIMITED Vs. COMMISSIONER OF INCOME TAX
LAWS(MPH)-1980-9-25
HIGH COURT OF MADHYA PRADESH
Decided on September 03,1980

MALWA MILLS KARAMCHARI PARASPAR SAHAKARI SANSTHA Appellant
VERSUS
COMMISSIONER OF INCOME-TAX Respondents




JUDGEMENT

Sohani, J. - (1.)BY this reference under Section 256(1) of the I. T. Act, 1961 (hereinafter referred to as " the Act"), the Income-tax Tribunal has referred the following questions to this court for its opinion:
" 1. Whether, on the facts and in the circumstances of the case, the income derived from sale of goods on credit by the assessee to its members amounts to providing credit facilities within the meaning of Section 80P(2)(a)(i) of the Income-tax Act, and whether such income is liable to be deductible under Sub-section (1) of the said section in computing the total income of the assessee ?

(2.)WHETHER the assessee is not entitled to the said deduction because the assessee is an Urban Consumers Co-operative Society ? "
2. The material facts giving rise to this reference briefly are as follows :

The assessee is a registered co-operative society. The assessment year in question is 1971-72. Daring the relevant assessment year the assessee derived income from the business of banking and also from the consumer stores run by the society. Before the ITO the assessee claimed under the provisions of Section 80P(2) of the Act exemption of its income from the credit sales to its members. The assessee contended that it was providing credit facilities to its members and hence its income arising out of credit sales was exempt. The contention was rejected by the ITO. On appeal, the AAC upheld the rejection by the ITO. On further appeal, the Tribunal found that the activity of selling consumer goods on credit was not covered within the scope of Clause (2)(a)(i) of Section 80P. The Tribunal further found that no income whatsoever was derived by the assessee from its activity of selling goods on credit. In this view of the matter, the Tribunal dismissed the appeal. At the instance of the assessee, the Tribunal has preferred the aforesaid questions of law to this court for its opinion.

Now the relevant provisions of Section 80P of the Act read as under :

" 80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in Sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in Sub-section (2), in computing the total income of the assessee.

(2) The sums referred to in Sub-section (1) shall be the following, namely:--

(a) in the case of a co-operative society engaged in-

(i) carrying on the business of banking or providing credit facilities to its members, or......

the whole of the amount of profits and gains of business attributable to any one or more of such activities...... "

(3.)FROM a persual of the aforesaid provision it is clear that what is liable to be deducted from the income of co-operative societies is the amount of profits and gains of business attributable to the activities referred to in Sub-clause (i) to (vii) of Clause (2) of Section 80P of the Act. In the instant case, in view of the finding of the Tribunal that no income whatsoever of the assessee was attributable to the activity of providing credit facilities to its members by the assessee, the questions of law framed by the Tribunal do not bring out, in our opinion, the real issue between the parties. We, therefore, reframe question No. 1 referred to us as follows :
" Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the income of the assessee derived from credit sales was (not) liable to be deducted under the provisions of Section 80P(2)(a)(i) of the Act, in computing the total income of the assessee ? "

In our opinion, the provisions of Clause (a)(i) of Section 80P(2) of the Act, are not attracted in the instant case in view of the finding of the Tribunal that no part of the income of the assessee was attributable to the activity of the assessee of selling goods on credit. Therefore, our answer to the question framed as above is in the affirmative and against the assessee.



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