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2016 (4) TMI 827 - HC - Income TaxExemption u/s 11 denied - transfer of fund for subsequent distribution to the members before payment of tax - whether the respondent society is managing its activity on behalf of its members in the most beneficial way by selling the products manufactured by the members? - members of the Respondent-Society are 'Maliks' who are owners of land (Agar) on which salt is manufactured - Held that:- 'Income' is defined under Section 2(24) of the Act and it includes profits and gains. The above facts lead us an irresistible inference that the 'Agar' (the land) belonging to the 'Maliks' is used to manufacture salt and its by-product and the same is sold by the Assessee-Society itself. In the course of its business, Society earns 'profits' which falls within the definition of 'income' under Section 2(24) of the Act. Therefore, in our considered view, the Assessing Authority was right in holding that the transfer of fund for subsequent distribution to the members before payment of tax is not a 'deductible expenditure' in computation of business income of the Assessee-Co- operative Society and further that the income declared after disbursement of profits is not logical and has no relevance to determination of taxable profit under the Income Tax Act. Revenue collection augments State exchequer. A prosperous treasury is a means for development leading to good living of citizenry. Income Tax one of the tributaries which flows into State coffers. Therefore, we are of the view it is imperative for the Courts to opt strict interpretation while dealing with fiscal laws. Based on evidence and admission of appellant, we have held, that the Society has transferred funds to Distribution Pool before offering to Tax. On facts, we have held that, the Society has indulged in the enterprise of manufacture and sale of salt. Non-compliance of statutory provisions is sought to be justified by the Society on a plea that Society indulges in such enterprise on behalf of members of the society and tax demand on the entire income would run counter to cooperative movement. There can be perhaps no disagreement with the proposition that Co-operative movement is benevolent to its members. Nonetheless, an ideology however lofty does not ipso facto exempt such entity from the solemn duty and sacrosanct obligation of obeying the law of the land nor does it insulate the entity from the vigour of penal actions in case of default. Thus, assessee a co-operative entity which runs a business enterprise is duty bound to offer its profits to tax before diverting any funds to the Distributable Pool Fund Account. - Decided in favour of revenue
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