The expression "providing credit facilities" in Section 80P(2)(a)(i) of the Income-tax Act, 1961, means lending services of credit facilities in connection with the business of banking, and does not include the facility of selling goods on credit to the members.

VS.K. Singhal, J.-The Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, has referred the following question under Section 256(1) of the Income-tax Act, 1961, for decision of this Court, in respect of the assessment year 1978-79. “Whether, on the facts and in the circumstances of the case, the Tribunal was justified in law in holding that the interest of Rs. 17,292 received by the co-operative society from 13 members and from bank on outstanding balances could qualiir for exemption under Section 80P(2)(a)(i) of the Act ?“

2. The facts of the case are that during the course of examination of the books of account of the assessee, the Income-tax Officer found that the interest paid by the members on the closing balance as at the end of the accounting year was Rs. 15,167 and the assessee has also received interest from the bank of Rs. 2,125. The Income-tax Officer came to the conclusion that the said amount of Rs. 17,292 does not qualify for exemption as provided under Section 80P(2)(a)(i) of the Income-tax Act, 1961. According to the Income-tax Officer, interest from the members attributable to extending credit facilities by way of advancing loans or giving cash assistance or “guarantee” protecting them from the heavy rate of interest from other financial institutions, qualifies for exemption under Section 80P(2)(a)(i). Since this income is on the business transactions from “C” class members and is not attributable to extend credit facility, the amount was disallowed from exemption claim. The Commissioner of Income-tax (Appeals), following the judgment of the Tribunal for the immediately preceding year, allowed deduction and the second appeal preferred by the Revenue before the Income-tax Appellate Tribunal was also dismissed. The Income-tax Appellate Tribunal, in respect of the preceding assessment year (1977-78), has held that, where the primary object of a society is to provide credit facilities to its members whether as a loan or in any other way it will be entitled to deduction under Section 80P(2)(a)(i) of the Income-tax Act.

3. Reference was made in this judgment of the Tribunal to the decision of the Gujarat High Court in the case of CIT vs. Karjan Co-operative Cotton Sale, Ginning and Pressing Society Ltd, [1981] 129 ITR 821 and of the Karnataka High Court in CIT (Addl.) vs. Ryots Agricultural Produce Co-operative Marketing Society Ltd. [1978] 115 ITR 709, wherein the question was with regard to the interpretation of the provisions of Section 80P(2)(a)(iii), and it was held that the concept of marketing will include all activities connected with the process of taking over from the agricultural producer-members and handing over marketable commodities to the purchaser and all the intermediate processes connected with the marketing of the agricultural produce of the members. It was held that the term “marketing” cannot be restricted only to buying and selling activity. These judgments were approved by the Supreme Court in the case reported in Broach District Co-operative Cotton Sales, Ginning and Pressing Society Ltd. vs. CIT [1989] 177 ITR 418.

4. From a bare perusal of the facts of this case, it would be evident that the dispute there was with regard to the interpretation of Section 80P(2)(a)(iii) and not of Section 80P(2)(a)(i) and, therefore, the interest charges, godown charges and insurance charges which were received by the assessee society as part of its marketing activity Or in the course of its marketing activity while marketing cotton of its members cannot be extended for the interpretation of Section 80P(2)(a)(i) of the Act.

5. Reliance wasalso placed by the Tribunal on the decision in U. P. State Warehousing Corporation vs. ITO [1974] 94 ITR 129 (All), where it was held that Section 10(29) of the Income-tax Act applies only to an authority constituted for the marketing of commodities and, evidently, such authority will specifically be a business enterprise. Ex hypothesi, the term “authority” there ca