Law:

Section:

Section 80P of the Income-tax Act, 1961 - Deductions - Income of Co-operative societies - Assessment year 1969-70 - Whether a chit fund is primarily intended to operate as a scheme for advancing loans from common fund to subscribers, their turn for getting such loans being determined either by auction or by drawing lots - Held, yes - Whether, therefore, where assessee - co-operative society in conducting chit funds, was providing credit facilities to its members, income earned by it from said business was entitled to deduction under section 80P(2)(a)(i) - Held, yes FACTS The assessee was a Co-operative society doing banking business A part of its business activity was also conducting kuris-chit funds. The ITO disallowed the assessee's claim for deduction under section 80P(2)(a)( i) on the ground that the business of conducting the chit fund was not one intended for providing credit facilities but was only in the nature of a saving scheme and that there was no restriction that only members of the society could become subscribers in the chit fund. The AAC upheld the order. The Tribunal scrutinised the rules governing the conduct of the chitty as contained in the chitty "thalavariyola" and found that clause 2 thereof specifically provided that only the members of the bank could become subscribers of the chitty and that the foreman (assessee) was prohibited from taking any outsiders as subscribers in the chit fund. Accordingly, the Tribunal held that the ITO and the AAC were in error in stating that the chit fund schemes of the assessee-bank were open to outsiders also and in disallowing the assessee's claim for deduction under section 80P(2)(a)( i). It was further held by the Tribunal that an intention to provide credit facility was clearly discernible in such chit fund schemes and that a chit fund could not be regarded as a mere saving scheme. On reference: HELD The Tribunal rightly held that it was not possible to sustain the view expressed by the ITO and by the AAC that the chit fund scheme was not being conducted by the assessee exclusively for the benefit of its members. What remained to be determined was only whether in conducting the chit fund schemes the…

Deprecated: trim(): Passing null to parameter #1 ($string) of type string is deprecated in /home/digixyei/sldsystempk.com/view/master-layout/view_case.php on line 492