Law: Income Tax Act, 1961

Section: 2,2(a)(1)

Income-tax------Cooperative society---Exemption---Providing credit facilities to members---Society purchasing auto-rickshaws and selling them to members under hire purchase agreement---Cannot be treated as providing credit facilities---Not entitled to exemption---Indian Income Tax Act, 1961, S.SOP(2)(a)(i). The assessee, a cooperative society, was formed to promote the economic interests of its members by purchasing auto-rickshaw vehicles and selling them on hire purchase terms to the members. The society purchased auto-rickshaws in its own name from out of its own funds or from funds borrowed from banks. Thereafter, the auto-rickshaws were sold to members who made applications therefor under hire-purchase agreements, under which the members had to pay an overall consideration in instalments during a period of five years. If the member paid all the instalments the society was under an obligation to convey the vehicle outright to the member on a nominal consideration of Re. 1. The assessee claimed exemption under section 80P(2)(a)(i) of the Income Tax Act, 1961, on the ground that it was carrying on the business of providing credit facilities to its members. The Appellate Tribunal upheld the claim…

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