Commissioner of Income Tax vs Tamil Nadu Co-operative Silk Producers Limited

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. 515/Mds/2000, dated April 16, 2003, with reference to the assessment year 1995-96.

The Revenue is the appellant. The assessee is a co-operative society and its main object is to procure raw silk and twisted silk and market the same to its members. The assessee filed its return showing nil income after claiming deduction under Chapter VI-A. While completing the assessment, the assessee''s claim for deduction u/s 80P(2)(a)(i) of the Income Tax Act was rejected by the Assessing Officer on the ground that the activity of the assessee procuring and supplying raw silk and twisted silk on credit to its members cannot be considered as "carrying on the business of banking or providing credit facilities within the meaning of Section 80P(2)(a)(i)". On appeal by the assessee, the Commissioner of Income Tax (Appeals) allowed the assessee''s claim following the decision of the Tribunal in the assessee''s claim following the decision of the Tribunal in the assessee''s own case for the assessment years 1984-85 to 1991-92 and 1981-82. 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, on the facts and in the circumstances or the case, the Income Tax Appellate Tribunal was right in holding that the assessee co-operative society was entitled to deduction u/s 80P(2)(a)(i) of the Income Tax Act?

It is fairly conceded by 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 December 12, 2005, made in T.C. No. 54 of 2001 Commissioner of Income Tax Vs. Salem Co-operative Sugar Mills Ltd., , 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 January 2, 2006, made in T.C. (A.) No. 1627 of 2005 (CIT v. Madurantakam Cooperative Sugar Mills Ltd., Chengai Anna District) and in the judgment dated October 26, 2006, in T.C. (A.) No. 2451 of 2006 (CIT v. Attur Agricultural Producers Co-operative Marketing Society Ltd.).

In view of the above settled proposition of law, we hold that the respondent-co-operative society which is engaged in the marketing of raw silk and twisted silk is eligible for the benefit of Section 80P(2)(a)(i) of the Income Tax Act in respect of the interest received from its members for supplying the materials on credit.

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