- (1.) OPINION of this Court is sought for by the Tribunal, Allahabad Bench, Allahabad through this reference under S. 256(1) of the IT Act, 1961 in regard to the following question formulated by it : "Whether, on the facts and in the circumstances of the case and on a proper interpretation of the objects of the society and the provisions of S. 80P of the IT Act, 1961 the Tribunal was justified in holding that the interest earned by the assessee co -operative society from its members was covered by the provisions of S. 80P(2)(a)(i) of the IT Act, 1961, and, therefore, exempt from tax ?"
(2.) THIS reference relates to the asst. yrs. 1975 -76 and 1976 -77 pertaining to Krishak Sahkari Ganna Samiti Ltd., Lakhimpur Kheri. The statement of the case is as follows : The assessee -society was formed with the main object of organizing 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 proceedings for assessment it was claimed before the ITO that the interest received by the assessee -society from its members was also entitled to exemption under S. 80P but the ITO 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 CIT(A). The appellate authority agreed with the view of the ITO, who observed that the ITO has only considered the receipts and not the expenses for earning the income and thereby directed the ITO to make assessments afresh. The assessee -society went up before the Tribunal, which, however, held that the facts of the case had not been properly appreciated either by the ITO or by the CIT inasmuch as one of the main objects of the assessee co -operative society was to lend to its members as per Object No. 4 and even though it was not carrying on money -lending business it was providing credit facilities to its members in the sense that it lent money to them and earned interest thereon and therefore sub -cl. (i) of cl. (a) of Sub -S. (2) of S. 80P of the IT Act, 1961, was applicable and the interest income earned by the assessee -society from its members was liable to exemption.
(3.) SRI Prakash Krishna, learned standing counsel of the Revenue submitted as follows : Sec. 14(3) was inserted in the Indian IT Act, 1922 by Finance Act, 1955 providing that the tax shall not be payable by a co -operative society including such a co -operative society carrying on the business of banking in respect of profit and gains of business carried on by it in respect of interest and dividends derived from its investment with any cooperative society etc. The old IT Act, 1952, however, was repeated by IT Act, 1961. Sec. 81 of which provided income of co -operative society exempt on certain circumstances mentioned therein. By Act 2 of 1967 S. 80P was inserted for the first time providing that a co -operative society shall be entitled for deduction in respect of sums specified in Sub -S. (1) or Sub -S. (2). Laying emphasis on the words "providing credit facilities to its members" it was submitted that the word "credit facilities" will draw its colour from the word "business of banking" mentioned in the earlier part meaning thereby that only those co -operative societies whose chief or main activity is to provide credit facilities to its members only would be entitled for deduction. Reliance was placed on following decisions : (i) CIT vs. Madras Autorickshaw Drivers' Co -operative Society Ltd. (1983) 143 ITR 981 (Mad) at p. 987 wherein it was observed that for invoking or applying S. 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 vs. 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 vs. CIT 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 corners of the provision granting deduction under Chapter VI -A of the IT Act containing S. 80(P). (iv) CIT vs. 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 opinion is capable of being formed with the rule of interpretation that a provision granting deduction should be construed liberally so as to effectuate the object thereof may be taken recourse to. (v) CIT vs. N.C. Budharaja and Co. (1993) 204 ITR 412 (SC) holding that the liberal interpretation which advances the purpose and object of beneficent provisions cannot be carried to the extent of doing violence to the plain and simple language used in the enactment. On facts, the standing counsel of the Revenue contended that from the main object of the assessee -society it is clear that it being not a credit co -operative society is not entitled for deduction of its interest income. Sri Prakash Krishna also submitted arguments in writing which is on the record. ;