TMI Blog1989 (2) TMI 3X X X X Extracts X X X X X X X X Extracts X X X X ..... Bazpur Co-operative Sugar Factory Ltd. is not covered under section 14(3) of the Indian Income-tax Act, 1922 ? (2) Whether, on the facts and in the circumstances of the case and on a true and correct interpretation of the various clauses of the agreement, the sums of ₹ 51,295 and ₹ 58,937 received as interest on advances would not be the assessee's income from coal and sugar business and would thus be exempt under section 14(3) of the Indian Income-tax Act, 1922 ? At the hearing, it has been clarified by counsel for both parties that in the second question referred to above, the dispute is confined to the sum of ₹ 51,295 only. The relevant assessment year is 1961-62 corresponding to the accounting year ending with June 30, 1960. The assessee is a co-operative society registered under the Co-operative Societies Act, 1912. This being an apex body, its members are the various district co-operative societies, district co-operative banks and some Government and other co-operative societies within the State of Uttar Pradesh. The principal object of the society is to regulate the distribution and supply of items like coal, sugar, cloth, etc., through the mem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facturer hereby undertakes not to appoint more than two agents as aforesaid. (20) The agent shall, simultaneously with the execution of this agreement, furnish a cash security of Rs. two lakhs to the manufacturer for a period of two years (irrespective of previous determination of the agreement for any cause whatsoever) to ensure against due compliance by the agent of the terms hereof ; such security shall carry interest at the rate of 4 1/2 per cent. per annum. Such security shall be repayable with interest to the agent within one month of the expiry of the period fixed in the agreement after adjustment of accounts between the parties. The manufacturer shall have the option to realise from the said security money all losses suffered and/or expenses incurred and not paid by the agent in pursuance of the provisions of this agreement. If the said security shall fall short of Rs. two lakhs at any time, the deficiency therein shall be made good by the agent within 15 days of the notice in writing from the manufacturer. The amount of ₹ 9,000 thus represented only interest on the security deposit and could not be mixed up with the other sums received by the assessee in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e necessary investments by way of payment of price of sugar to be procured from the factories and also to pay the administrative charges incurred for the distribution of sugar. This administrative charge was, however, recouped by the agents and paid over to the assessee. The delivery of the sugar from the various factories was to be taken by the various District Co-operative Development Federations which had entered into agreements with the assessee on behalf of the assessee as soon as the release orders were issued by the Government of India. The sugar so received was to be stored in godowns and was to remain under the custody of godown-keepers of the assessee or the bankers of the assessee. The salaries of the godown-keepers and the chowkidars appointed for safe custody of the stocks of sugar were to be paid by the agents . . .' The sugar so stored was to be released to the agents as and when required by them on full payment of its price at the rate fixed by the State Government or the District Magistrate concerned. The stocks of sugar taken over by the agents was to be sold by them to retailers, and permit-holders who were to be nominated by the District Magistrate or the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which interest had been earned under the agreement did not constitute investment and, therefore, was not covered by section 14(3)(iii) of the Act. Section 14(3) provides that tax shall not be payable by a co-operative society in certain situations. Clause (i) under its six sub-clauses refers to specific classes of co-operative societies in whose cases there is total exemption. Clause (ii) exempts income in respect of profits and gains of business of co-operative societies not covered by clause (i) up to ₹ 15,000. Clause (iii) exempts interest and dividends and income derived from investments with any other co-operative society. Clause (iv) exempts income derived from letting of godowns or warehouses for storage, processing or facilitating the marketing of commodities while clause (v) exempts interest on securities chargeable under section 8 or any income from property chargeable under section 9, where the total income of the co-operative society of specific types mentioned therein does not exceed ₹ 20,000. There can be no dispute on the conclusion reached by the High Court that the money provided by the assessee was by way of investment. In fact, if this money had ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
