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2018 (2) TMI 1586 - AT - Income TaxIncome of the consumer co-operative society - chargeable to tax u/s 4 or not - Proof of mutual association - Claim of deduction u/s 80P - activity of purchase and distribution of electric power - mutuality concept - Held that:- There is no dispute that the assessee is a mutual association established for the purpose of supply of electricity to the rural farmers at a reasonable price to improve the infrastructure. All the members and contributors are identifiable and the contributors as well as the consumers are the same. There is no other outsider is involved in the association. As in the case of Merchant Navy Club [1971 (9) TMI 59 - ANDHRA PRADESH High Court -] and Royal Western India Turf Club Ltd. (1953 (10) TMI 9 - SUPREME Court) held that the income of the club was not profit from business assessable u/s 10 of the IT Act on mutuality basis. In the instant case, there is no dispute that contributors and the consumers are one and the same. In the absence of bye laws regarding the disposal of surplus assets, section 69B of AP Cooperative Societies Act 1964 would be applicable and in such case, the surplus would be vested with the Registrar who shall hold it in trust and shall transfer it to the reserve funds of the society registered with the similar objects. In the similar circumstances, in CIT Vs. West Godavari District Rice Millers Association [1983 (9) TMI 47 - ANDHRA PRADESH High Court] held that income of the society is exempt even if the surplus goes to some other society with similar objects on dissolution. As the assessee has amended the bye laws and placed before the CIT(A), after got registered with the Registrar of society to enable the assessee to distribute the surplus assets among its members before completion of the appellate proceedings. Therefore, we hold that the assessee is a mutual association and the income of the society is not chargeable to tax u/s 4 of the IT Act - Decided in favour of assessee.
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