9911796707
TMI Blog1982 (3) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... f all the transactions and further in determining such profits expenditure could not be bifurcated between activities relating to the members and those relating to non-members. The matter went up to the Appellate Tribunal and in IT Appeal No. 73 (Nag.) of 1980 the Tribunal concurred with the Commissioner (Appeals). For the year under consideration the learned Commissioner (Appeals) upheld the view canvassed on behalf of the assessee. The revenue urged that the decision of the Tribunal in IT Appeal No. 73 (Nag.) of 1980 was not correct and required a revision. Accordingly, the matter was referred to the President who constituted a Special Bench for disposing of the appeal for the assessment year 1974-75, for a decision on the following issues: 1. Whether the deduction under section 80(P)(2)(a)(iv) is available to the assessee in respect of trading with non-members ? 2. Whether the deduction has to be granted with reference to the net profit and not the gross profit ? 2. The facts of the case are as follows: The assessee is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1970. The objects of the society are in Marathi and an authentic English t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; Percentage of Claim of the sale profit sales to mem- assessee bers ------------------------------------------------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ike Pumps, Motors, Crushers, etc. Sugar 23,72,071.07 32,056.65 17 ---- Barbed--- 13,106.33 1,891.55 69.7 1,891.55 wire for fencing Gunny bags 13,808.50 &nbs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... p; 13,256.26 for sheds ------------------------------------------------------------------------------------------------------------------ 1,12,80,503.00 4,32,749.35 55 4,04,547.96 ------------------------------------------------------------------------------------------------------------------ It appears that in making the above claim the assessee followed the dictum laid d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 12,589 3. Cloth 2,076 1,474 ------------------ &nb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 602 29 per cent of the G.P. ------------------- 2,51,449 & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 1,29,622 ------------------- Nagpur, &n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 80P could not render the decision inapplicable to the assessee's case, as, many other sub-sections have also not been referred to in that para. The basic question being whether relief should be given on the gross or the net income and the Supreme Court having decided that relief should be given on the gross income, the learned Commissioner (Appeals) held that the assessee was entitled to relief on the gross profit earned by the society in its transactions. 5. We also now refer to the decision of the Tribunal in this very case, for the assessment year 1975-76. The Tribunal held that the decision of the Gujarat High Court in Sabarkantha Zilla Kharid Vechan Sangh Ltd. was not applicable since that decision was on the interpretation of section 81(1)(d) which has subsequently been deleted. The Tribunal, accordingly, declined to examine in detail the Gujarat High Court's decision. Similarly, the decision in Chatrapati Shivaji Sahakari Sakhar Karkhana Ltd. was held to be inapplicable as in that case the Judges of the Bombay High Court were interpreting provisions of sections 10, 14 and 16 of the Indian Income-tax Act, 1922, which were substantially different. The revenue had relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2)(a) and activities under section 80P(2)(c) have to be separately determined. Relief under section 80P(2)(c) will have to be restricted to Rs. 20,000. 8. The learned departmental representative then referred to the definition of 'total income' under section 80B(5) of the Act. The gross total income meant the total income computed in accordance with the provisions of this Act. There is thus no scope for giving relief on the gross profit as that would mean computation of the total income contrary to the scheme laid down in the Act. 9. The learned departmental representative then submitted that the Tribunal was not right in brushing aside the decision of the Gujarat High Court in Sabarkantha Zilla Kharid Vechan Sangh Ltd. on the ground that section 81(1)(d) was no longer on the statute book. The wordings of section 80P(2)(a) were exactly the same as those of section 81(1)(d). When the two sections are pari materia, the decision on one cannot be ignored while interpreting the other. 10. He then referred to the decision of the Supreme Court in Cloth Traders (P.) Ltd. He pointed out that the wordings in section 80M of the Act are quite different from those of section 80P(2)(a). He c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities : Provided that in the case of a co-operative society failing under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:--- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to the society; (3) the State Government; (b) in the case of a co-operative society, being a primary society engaged in supplying milk raised by its members to--- (i) a federal milk co-operative society ; or (ii) the Government or a local authority ; or (iii) a Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s total income as reduced by the deductions under section 80HH, section 80HHA, section 80-I, section 80J, section 80JJ and section 80JJA." We find that a co-operative society can engage itself in various activities. These have been classified under section 80P(2)(a), (b) and (c). In particular we refer to section 80P(2)(c) which refers to activities other than those specified in clause (a) or (b), either independently of, or in addition to, all or any of the activities so specified. Thus, obviously, activities other than those relating to purchase of agricultural implements, seeds, livestock or other articles intended for agriculture, for the purpose of supplying them to its members, like supplying the same articles to non-members, would fall within section 80P(2)(c). The section requires that the profits and gains attributable to such activities should separately be determined. Hence, the purpose of the section would be frustrated if it is presumed that the profits and gains of all activities of the society are to be determined under section 80P(2)(a) alone, ignoring the other sub-sections, nor can we ignore the argument of the learned departmental representative that profits and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp; sixty per cent of than the dividends referred to in clause (a) such income ; (2) Where a company to which this, section applies is entitled also to the deduction under section 80K, the deduction under sub-section (1) shall be allowed in respect of income by way of dividends referred to therein as reduced by the amount of the deduction under section 80K." Here the Supreme Court held that the opening part of the section does not have a limitative effect and they are descriptive of items of income included in the total income and are not indicative of the quantum of amount included under different items in the computation of the total income. The section starts with 'where the gross total income of an assessee includes income by way of dividends', then the deduction is to be given for such income by way of dividends. Hence, the Supreme Court held that the entire income from dividends, which in this case was interpreted as the gross dividends, has to be deducted under section 80M. But the w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income was held to be business income and while determining the business income, a part of the managing agency commission was sought to be disallowed as relating to agricultural operations. Since there was no finding of fact that the cultivation of sugarcane and the manufacture of sugar constituted different activities, the question of disallowing a part of what was admittedly a business expenditure, as not relating to business, did not arise at all. In the present case, the total income is to be determined in accordance with the provisions of this Act. Then the portion of income which is attributable to certain specified activities of the co-operative society has to be taken out as a deduction from the total income. The section itself imposes a duty on the ITO to determine the profits and gains attributable to such activities as are mentioned in section 80P(2). We, therefore, hold that the decision of the Supreme Court in Maharashtra Sugar Mills Ltd. does not apply to the facts of the case. The decision of the Gujarat High Court in Sabarkantha Zilla Kharid Vechan Sangh Ltd. cannot also be ignored for the reasons urged by the learned departmental representative. 17. Before parting ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
