Co-operative society : Deduction u/s. 80P(2)(a)(i) of I. T. Act, 1961 : A. Y. 1995-96 : Society engaged in procuring raw silk and marketing to its members: Interest received from members for supplying materials on credit : Entitled to deduction.

26. Co-operative society : Deduction u/s. 80P(2)(a)(i) of I.
    T. Act, 1961 : A. Y. 1995-96 : Society engaged in procuring raw silk and
    marketing to its members: Interest received from members for supplying
    materials on credit : Entitled to deduction.

[CIT vs. Tamil Nadu Co-operative Silk Producers Ltd.;
311 ITR 224 (Mad)].

The assessee was a cooperative society engaged in the
business of procuring raw silk and twisted silk and marketing it to its
members. The assessee received interest from its members in respect of
material supplied on credit. For the A. Y. 1995-96 the Assessing Officer
rejected the claim of the assessee that the interest so received from the
members is deductible u/s. 80P(2)(a)(i) of the Income-tax Act, 1961. The
Assessing Officer held that the activity of the society in procuring and
supplying raw silk and twisted silk on credit to its members could not be
considered as “carrying on the business of banking or providing credit
facilities within the meaning of section 80P(2)(a)(i)”. The Tribunal allowed
the assessee’s claim.

On appeal by the Revenue, the Madras High Court upheld the
decision of the Tribunal and held that the assessee co-operative society was
eligible for the benefit of section 80P(2)(a)(i) of the Act in respect of the
interest received from its members for supplying the materials on credit.