Commissioner of Income Tax vs Attur Agricultural Producers Cooperative Marketing Society Ltd.

P.D. Dinakaran, J.—The above tax case is directed against the order of the Income Tax Appellate Tribunal made in I.T.A. No.

689/Mds/2001, dated 6.1.2006 with reference to the assessment year 1996-1997.

The Revenue is the appellant. The assessee is a co-operative society engaged in the marketing of agricultural products. The assessee advanced

loans to its members and received interest therefrom. The assessee had claimed deduction u/s 80P(2)(a)(i) of the Income Tax Act and the

Assessing Officer negatived the claim of the assessee as the primary objective of the assessee is not that of the credit society that is engaged in the

business of banking. On appeal, by the assessee, the Commissioner of Income tax (Appeals), following the appellate order for the assessment

years 1993-94 and 1994-95 held that the assessee is entitled to deduction in respect of interest income received on advances made to his

customers for the purpose of deduction u/s 80P of the Income Tax Act. The said order of the Commissioner of Income Tax (Appeals), on appeal

by the Revenue, was confirmed by the Tribunal.

Exasperated, the Revenue has preferred this appeal by raising the following substantial question of law:

Whether in the facts and under the circumstances of the case, the Tribunal was right in holding that the respondent Co-operative Society which is

engaged in the marketing of the agricultural produce is eligible for the benefit of Section 80P(2)(a)(i) of the Income Tax Act in respect of the

interest received from members ?

It is fairly conceded by the learned Counsel appearing for the Revenue that the issue raised in the above question is squarely covered against the

Revenue by the judgment of this Court dated 12.12.2005 made in T.C. No. 54 of 2001 (The Commissioner of Income Tax, Coimbatore v. The

Salem Co-operative Sugar Mills Ltd., Salem), wherein the Division Bench of this Court, taking note that the prime object of the assessee therein is

running a sugar mill, and that the object clause or/and the business activities of the assessee therein is also granting loans and advances to the

members, held that the assessee therein is entitled to exemption u/s 80P(2)(a)(i) of the Income Tax Act. The said decision was also followed in the

judgment dated 2.1.2006 made in T.C.(A) No. 1627 of 2005 (Commissioner of Income Tax, Chennai v. The Madurantakam Co-operative Sugar

Mills Ltd., Chengai Anna District).

In view of the above settled proposition of law, we hold that the respondent Co-operative Society which is engaged in the marketing of the

agricultural produce is eligible for the benefit of Section 80P(2)(a)(i) of the Income Tax Act in respect of the interest received from members.

Finding no substantial question of law arises for consideration, the appeal stand dismissed.