TMI Blog1956 (7) TMI 52X X X X Extracts X X X X X X X X Extracts X X X X ..... s without the previous sanction of the Registrar. It is agreed that the assessee is a distributive society. There is no specific finding as to whether the requisite sanction for dealing with non-members has been obtained or not : but as the Appellate Tribunal has dealt with the case as if the said sanction had been obtained we shall also do the same. 2. The contentions urged by the assessee and the conclusions reached can be gathered from paragraphs 6, 7 and 8 the statement of the case. 6. The Income-tax Officer, Trichur, assessed ₹ 14,497 and ₹ 42,826 for the aforesaid years 1950-51 and 1952-53 as the apportioned profit of the society from its dealings with non-members. The rest of the profit earned by the society in the society in the aforesaid two 'previous years' was not assessed as he considered them to be exempt under the aforesaid clause referred to in paragraph 4 supra. The assessee contended before the Income-tax Officer and the Appellate Assistant commissioner in appeal thereafter, that even profit from its dealings with its non-members came within the purview of the same clause and was exempt thereunder, which, however, was not accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in section 9j of that Act, (2) dividends, or] (3) the other sources referred to in section 12 of the Indian Income-tax Act. The clause was added to the Order by S.R.O. 1800 dated 14th November, 1951, and the exemption granted is on the lines of the exemptions available to co-operative societies on that date Part A States under a notification of 1925, issued under section 60 of the Indian Income-tax Act 1922. 4. The history of the exemptions in favour of co-operative societies till the amendments effected by the Finance Act of 1955, in pursuance of the recommendations of the Taxation Enquiry Commission is briefly sum-marised in A.N. Aiyar's Indian Income-tax Act, 1922, (1955 Edition, page 12) as follow: Government had granted some exemptions to co-operative societies from the very inception of the co-operative movements. So far as income-tax was concerned- (i) the 'profits' of a co-operative society, and (ii) all dividends and other payments received by the members of the society 'on account of profits' were exempted by a Notification in 1925. The expression 'profits' was construed by the courts as meaning profits from business. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Are these by themselves sufficient to make the said amounts the profits of the Co-operative Society and attract the exemption invoked by the assessee? Our answer is no. In order to obtain the exemption the profits must satisfy another test. They must have accrued from one or of the objects for which the society was formed and registered. 8. The objects of co-operative society before us as stated in its bye-laws are: the organisation and development of rural production on a commercial basis and marketing. Marketing in the context ink which it occurs must mean the marketing of goods produced by the organisation and development of rural production on a commercial basis. 9. It is not contended that the profits of ₹ 14,497 ₹ 42,826 which were admittedly earned as the sole distributor of the cochin State of its quota of yarn from mills within and without that State were the profits of any such production or marketing . The contention is that the activity that produced the profit ids justified by clause (vi) of bye-law No. 3. The said bye law reads as follows:' The onjects of the society are the organisation and develop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... activities, is such income exempt from tax under item 2 of the Government of India Notification F. D. (C.R.) Notification R. Dis. No. 291-I. T/25 dated 25th August, 1925, as subsequently amended (Income-tax Manual, 10th Edition, Part II, pages 257-258) ? in the negative. 12. In the case above mentioned the Court proceeded, as we have done, on the basis that the amounts concerned constituted profits and gains of business. Learned counsel for the assessee contended before us that as even income from an illegal business is assessable under section 10 of the Indian Income-tax Act, 1922, his client is entitled to the exemption once it is established that the amounts are the profits and gains of a business and that the said amounts do not come within the three exceptions to the exemption granted by clause (iv) of paragraph 15 of the Part B States (Taxation Concessions) Order, 1950. 13. It is true that the Income-tax Act is not restricted in its application to the profits of lawful business and that elements of illegality will 'not ensure an avoidance of the tax. As stated by Kanga : The taint of illegality or wrong doing associated with income, profits or gains is ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
