TMI Blog2015 (4) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... visions of Section 67(2) of the Cooperative Societies Act the question of control of the State Government by specifying the mode of investment or the mode of use of the reserve fund can arise only in the eventuality when the society does not use the reserve fund in the business of the society. It is only in the event the society does not choose to use the reserve fund for the business of the society that the question about investing the reserve fund in the specified category of investments and thereafter utilizing the same for the objects specified by the State Government can arise. Hence, not only is there no diversion of income by overriding title but in fact there is no outgoing of funds from the domain of the assessee society. In fact, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mon order. In all these appeals, following substantial questions of law arise. i) Whether, in the facts and under the circumstances of the case, the ITAT was right in holding that the amount transferred to reserve fund account as per provisions of Sec. 67 of the Gujarat State Cooperative Societies Act, 1957 was not a diversion of income at source by overriding title? (ii) Whether in the facts and under the circumstances of the case, the ITAT was right in holding that transfer to reserve fund cannot be treated as business expenditure and allowed deduction u/s 28/37 of the Income Tax Act, 1961? 2. Today, when all these appeals are taken up for final hearing, it is reported that the issues/questions of law raised in the present appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investments and thereafter utilizing the same for the objects specified by the State Government can arise. Hence, not only is there no diversion of income by overriding title but in fact there is no outgoing of funds from the domain of the assessee society. In fact, the profits at the specified percentage are set apart so as to be available to the society for use in the business of the society at a later point of time. Once the society is in a position to use the funds lying in the reserve fund for the business of the society as and when the society so chooses, there can be no question of keeping out such profits from the purview of taxation. 9. Accordingly, the Tribunal was right in law in holding that the amount transferred to the r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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