TMI Blog1985 (9) TMI 51X X X X Extracts X X X X X X X X Extracts X X X X ..... the Appellate Assistant Commissioner. It was claimed that the aim of the society was to develop financial and social interest of the persons residing and working in the forest and helping them to avoid unemployment. The society was a labour society and only those persons who were members of the society were allowed to work as labourers in the forest. The membership was restricted to specified villages and on the condition of fulfilment of various requirements of the rules and regulations of the society. It was, therefore, claimed that the assessee's claim for exemption was fully covered by the aforesaid provisions and the disallowance of the assessee's claim for exemption was not justified. The said contention found favour with the Appellate Assistant Commissioner. The Appellate Assistant Commissioner, therefore, held that the assessee society had fulfilled the conditions as required under the aforesaid provisions and, therefore, the Income-tax Officer was not justified in rejecting the claim for exemption. A copy of the order passed by the appellate authority is at annexure " B " to the statement. Being aggrieved by the order passed by the Appellate Assistant Commissioner, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ound, otherwise, it would defeat the very purpose for which the provision is made, namely, for helping the labourer-oriented society. However, the Tribunal held that the right to vote to persons other than the labourers will go against the conditions laid down for exemption, inasmuch as the proviso enjoins that if any co-operative society is engaged in collective disposal of labour of its members, the whole of the amount of profits and gains would be exempt if the rules and bye-laws restricted the voting rights to three classes of its members set out in the proviso. If the bye-laws do not fit in with the aforesaid provisions, the claim for exemption cannot be entertained. In that view of the matter, the Tribunal held that the assessee was not entitled to the exemption under section 80P(2)(a)(vi) of the Income-tax Act. Copy of the Tribunal's order is annexed as annexure " C " to the statement. Thereafter, at the instance of the assessee, the Tribunal has made the reference and the above-mentioned question is referred to this court for decision. Mr. J. P. Shah, the learned advocate appearing for the assessee, submits that the proviso to section 80P(2) of the Act should not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owing, namely: (a) in the case of a co-operative society engaged in-... (vi) the collective disposal of the labour of 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 falling under subclause (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) State Government;......." The relevant bye-laws for membership are bye-laws No.7, 7A and 22. Bye-law No. 7, translated into English, is as under: " Any individual, residing in any of the villages falling within the range of Gora Dedia Para and in any of the villages within the falling series 11, 12 and 8 and who belongs to the labour class and whose application to enrol as a member has been accepted by the managing committee by a majority and who is of minimum 18 years of age and who has contributed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... page 223 in the said case: "It is well settled that even if the language of a statute in its ordinary meaning and grammatical construction leads to a manifest contradiction of the apparent purpose of the enactment, or to some inconvenience or absurdity, hardship or injustice, presumably not intended, a construction may be put upon it which modifies the meaning of the words, and even the structure of the sentences (See Tirath Singh v. Bachittar Singh, AIR 1955 SC 830). " Relying on these observations, Mr. J. P. Shah submitted that the proviso to sub-section (2) of section 80P of the Act should be construed in such a way that though there might be provisions in the bye-laws of the society providing right to vote to the members other than the three categories mentioned in the proviso, the benefit of exemption can be taken away if, in fact, the rules and bye-laws of the society are implemented by enrolling members other than the three categories mentioned therein. Before we proceed to see the object and purpose of the said proviso and its interpretation, it is necessary to point out that in the aforesaid case in CIT v. Satellite Engineering Ltd. [1978] 113 ITR 208 (Guj) immediate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with a right to vote. It is important to note that this provision is made for the benefit of the societies engaged in collective disposal of the labour of its members and, therefore, in order that any person other than the persons mentioned in the aforesaid three categories cannot have any voice in the working of the society, such members should not have the right to vote. It is also clear from the " note " with regard to bye-law No. 22 in the Finance (No. 2) Bill of 1971, that the object of amending section 80P of the Income-tax Act is to ensure that the labour co-operative societies and the fisheries co-operative societies engaged in catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipments in connection therewith for the purpose of supplying them to its members will be eligible for exemption from income-tax in respect of the whole of the income. This exemption will be subject to the conditions of the rules and bye-laws of the society which restrict the voting rights to the members who contribute their labour or carry on the fishing or allied activities, the co-operative credit societies which provide financial assistance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld be clearly borne out from the rules and bye-laws restricting the right to vote only to members specified in the proviso. The laudable object behind this enactment is to see that the working of such societies is not in any way interfered with or controlled by such outsiders. We have carefully considered the provisions of section 80P of the Act along with its object and we are of the view that the language of the proviso has clearly expressed the intention of the Legislature to carry out the object of eradicating any evil from any outside member from its root by providing that the right to vote be restricted only to three categories of members mentioned in the proviso in the rules and bye-laws of the co-operative society. It does not have any ambiguity. By interpreting the said proviso in its literal meaning, it is not likely to create any contradiction with the apparent purpose of the enactment or any absurdity or to defeat the object of the statute. In that view of the matter, the observations which are made in the Supreme Court judgment, Tirath Singh v. Bachittay Singh, AIR 1955 SC 830, are not applicable to the present case. Mr. J. P. Shah, the learned advocate appearing for ..... X X X X Extracts X X X X X X X X Extracts X X X X
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