M.B. Farooqi, J. - (1.) THE assessee is a co-operative society registered under the Co-operative Societies Act, 1912. For the accounting period relevant to the assessment year 1971-72 the assessee-society was also having income from two sources : (i) printing press ; and (ii) service charges for the supply of pumping sets by M/s. Southern Engineering Works to the cane growers.
(2.) THE ITO assessed to tax the income so derived by the assessee after repelling its contention that the same was exempt under Section 80P(2)(a)(i) of the I.T. Act, 1961. THE assessee's appeal to the AAC proved unsuccessful. On further appeal, the Tribunal accepted the contention of the assessee and held that the aforesaid income was exempt from tax under Section 80P(2)(a)(i) of the Act. At the instance of the Commissioner, the Tribunal has referred the following question of law for our opinion : "Whether, on the facts and in the circumstances of the case, the assessee was entitled to exemption under Section 80P(2)(a)(i) of the Income-tax Act, 1961, for income from press and income from supply of pumping sets?" Section 80P, in so far as is relevant, provides : "(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 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." This section was inserted in place of Section 81, which was deleted by the Finance (No. 2) Act of 1967, with effect from the 1st April 1968. The deleted Section 81(i)(a) was the same as the present Section 80P(2)(a)(i). In the case of Addl. CIT v. U. P. Co-operative Cane Union [1978] 114 ITR 70 (All), which was inter partes, this court held that income from printing press business was not exempt from tax under Section 81(i)(a) of the Act. Following that decision, we hold that the above-mentioned income is not exempt from tax under the present Section 80P(2)(a)(i) either.
(3.) DEALING with the question whether income from service charges was exempt from tax, the Tribunal noticed the facts and observed : "The pumping sets have been supplied to the cane-growers, who are members of the union which is one of the members of the assessee-Federation and the pumping sets have been supplied by M/s. Southern Engg. Works under an agreement with the Federation dated March 5, 1970. The pumping sets have been supplied against 75% loan granted by the banking institution to the growers. The applications were processed by the Federation and the Federation stood guarantee for the payment to the suppliers." After going through Clauses 13 to 17 of the aforesaid agreement, the Tribunal further observed: "If these clauses are taken into consideration, it is absolutely clear that the Federation took the responsibility for the payment of the invoice price within 7 days from the date of the invoice. The Federation also is responsible for the payment. The Federation has undertaken the liability for making available the loans to the farmers either from its own resources or from the financing institutions. Thus, the Federation has provided credit facilities to the cane-growers who purchased pumping sets. The credit facility was either offered by the Federation itself or it was offered by procuring the facility from the banking institutions. But so far as the final payment was concerned, it was guaranteed by the Federation and, even in the case where the loans were provided by the banking institutions the liability under the guaranteeship remained with the Federation and the Federation was also liable to the supplier for the prices. This indicates that even otherwise the Federation has provided credit facilities to the members." ;