TMI Blog2015 (2) TMI 163X X X X Extracts X X X X X X X X Extracts X X X X ..... . The submissions of the assessee that earlier society was for the limited purpose of selling the products manufactured by the members in a profitable way by taking advantage of cooperative methods and the present society is acting on similar lines, therefore, denial of the same is not legally correct by taking different plea by the AO. It is a fact that the bye laws cannot be segregated and read to hold the income generated as income of the assessee. We have gone through the case laws cited by the assessee, which are also supporting the case of the assessee. In view of this, we reject grounds of appeal taken by the revenue. - Decided in favour of assessee. - I.T.A. Nos.252 to 256 & 377/PNJ/2014 - - - Dated:- 23-1-2015 - S/Shri P.K.Bansal and D.T. Garasia, JJ. For the Appellant: Shri R.Durai Pandian, ld.DR For the Respondent: Shri Navin P.Nadkarni, ld.AR ORDER Per D.T.Garasia, JM These appeals filed by the revenue are directed against common consolidated order dtd.2.4. 2014 of ld CIT(A), Mysore for the assessment years 2007-08 to 2011-2012, respectively, in the matter of assessment u/s.143(3) r.w.s 147 of the Act. 2. Grounds common to all the appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee is a cooperative society formed on 08.05.1952 and registered under Bombay Co-operative Societies Act on 17.09.1952 with the object of carrying on business of manufacture and sale- of common salt. It is an Association of Person who are termed Maliks , who are members of the society by virtue of their ownership or interest in the lands for manufacture of salt in large track of salty wet land of Narnapur and Nagarbail villages of Gokarria Hubli of Kumta Taluk. These lands are given to the society for manufacture of salt and sale of the sathe. The Society maintained a record of its manufacture and sale of salt and distribution of profits once in six months. The society manufactured salt and sold the same. The society maintained separate records for this activity and after debiting connected expenses and the societies commission and interest on manufacturing and trading of salt‟ and the surplus was taken to another account called distribution pool fund account‟ and then the proportionate amounts to the members according to their unit holding were distributed through this account. The said sum of society s commission and interest on manufacturing trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowing deduction claimed as transfer to the distribution pool account since the same has no connection to earning profit and is a case of application of income. The AO observed that the assessee has not segregated the residual bye-laws of its predecessor salt sale society as irrelevant and transferred income of the society by manufacture and sale of salt to distribution pooled fund account before offering to income tax which is not a deductible expenditure in computation of business income. It was in this backdrop that the Assessing Officer after allowing depreciation and commission of society arrived at the taxable income by including the amounts transferred to the distribution pool fund account. Aggrieved by the order of the AO, assessee carried the matter in appeals before ld CIT(A). 6. Ld CIT(A) upheld the assessment order passed by the AO u/s.147 of the Act as he observed that the AO had given detailed reasons for reopening the assessment. 7. Before ld CIT(A), the assessee filed the resolution for charging of commission, bye-laws of the society and the list of members alongwith their PAN numbers and income in their individual hands. Assessee referred to clause 4(a) of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e present society is acting on similar lines, denial of the same is not legally correct. After considering the assessee‟s submissions, ld CIT(A) allowed the assessee‟s appeals, inter alia, by observing as under: 1 have considered the rival contentions carefully. The crucial fact on this issue is the approved by laws of the society. The relevant clauses are extracted in the assessment order also. However, the AO observed that certain of the clauses are irrelevant. I do not agree with the observation of the AO that clauses like 4(m) and 4(u) ceases to operate. In fact, this clauses are supplementary and complimentary to 4(a) 4(q) In fact clause 4(i) stipulates that the society pays on behalf of the members the assessment and malign rent. This also shows that the society is only managing the whole activity on behalf of the members to maximize the profits in the most beneficial way to the members This activity is carried on for last several years and even before the operation of the present IT Act which is IT Act 1962. Considering the totality of the facts and circumstances I find strength in the argument of the appellant that the bye laws cannot be seg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operatively. It helps individual members by consolidating the land for better production sale of salt on their behalf. ii) The contract between the society members has only provided commission to society as its income. iii) It is undisputed that members have paid taxes on their share individually. iv ) This system is followed for last several years is accepted by dept in earlier years. v) The society is carrying on this activity for on behalf of malik members who are the owners of land. vi) The clear understanding as per bye laws resolutions is that land belonging to members is put to use for production sale of salt proceeds after accounting for commission exps is distributed pro-rata of and holding among the members. II. The relevant Bye laws of the Society are as under. i) Bye law No. 4 (a) - To acquire from the maliks the right of manufacture of salt in the Nagarbail saza, Sankatta to manufacture salt and other bye products in these areas on co-operative basis ii) Bye law Na 4 (m) - To help members in getting a fair price for the salt by products produced by the society on their beha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT 154 ITR 449 (Raj) CIT v M. D. Manohar Rao 155 TR 696 (A. P) vi) CIT v A. Tosh Sons (P) Ltd, 166 ITR 867 (Cal) vii) Jit Pal X - Rays (P) Ltd v CIT 267 ITR 370 (All) viii) Radha soarni Satsang v CIT 193 ITR 321 (SC) 12. Having heard the rival submissions and perusing the materials on record, we find no infirmity in the well reasoned order of ld CIT(A) to interfere. We also find that ld CIT(A) has categorically discussed every points raised by the Assessing Officer and also the submissions of the assessee in the impugned order. We have also gone through the written submissions filed by the assessee before us, wherein, in different bye laws, the objectives of the society are mentioned. We find that the clauses mentioned in the bye laws of the society are supplementary and complimentary to clauses 4(a) 4(q). In fact clause 4(i) stipulates that the society pays on behalf of the members the assessment and malign rent. This also shows that the society is only managing the whole activity on behalf of the members to maximize the profits in the most beneficial way to the members. This activity is carried on for last several years and even before the operation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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