TMI Blog1984 (7) TMI 45X X X X Extracts X X X X X X X X Extracts X X X X ..... of the value of Rs. 36,76,327 to its members; the value of fertilisers supplied to non-members was Rs. 83,13,793. In the income-tax return filed for the assessment year 1970-71, the assessee claimed that the profit arising on the supply of above fertilisers to the members as well as nonmembers is not liable to be included, as it qualified for deduction under s. 80P(2)(a)(iv) of the Act. The ITO rejected the" claim for deduction of the profit holding that the assessee did not actually carry on any business in the purchase and sale of fertilisers to its members. The ITO was of the view that, under the scheme formulated by the Government of Andhra Pradesh in the G.O. dated March 7, 1964, above referred, the assessee was merely an agent appointed for the distribution of fertilisers and the assessee derived only commission. The ITO held that the deduction under s. 80P (wrongly mentioned as s. 81 in the assessment order of the ITO) is only in respect of profit derived by a co-operative society from the purchase and sale of commodities used for agricultural purposes, but not in respect of profit derived as a distributor of such commodities as the agent of the Government. In that view, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y to furnish the same, as they do not have the copies with them. We have not been able to ascertain as to what happened to the Tribunal's order in the assessee's case for the assessment year 1966-67, that is to say, whether the Commissioner accepted the Tribunal's decision or a reference was carried to this court. The learned standing counsel is unable to clarify. We wish to observe that the orders of the Tribunal must be self-contained and set out fully the facts and the reasons for arriving at a decision. References to earlier orders are unhelpful because, at the time of hearing of these references, those orders are not placed before this court and it will not, therefore, be possible to appreciate the Tribunal's view in these matters. We hope that the Tribunal as well as the authorities below will take note of the above and ensure that the orders passed by them are self-contained, so that, if matters reach the High Court for consideration of any question of law, it will not become necessary to search for the reasons for the decisions taken by the authorities below and the Tribunal. We have, in the circumstances abovementioned, examined the provisions of the Act in the light of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operative societies and the other for non-members and the two schemes were approved by the Government. Learned standing counsel contends that, under the scheme, the District Co-operative Marketing Societies like the assessee do not purchase fertilisers from the Government. The Government supplies to them fertilisers for the purpose of distribution among the primary co-operative societies who, in turn, supply the fertilisers to the consumers. Learned standing counsel refers to clause (h) of Part VII of the G.O. which states that " the District Co-operative Marketing Societies will be the monopoly stockists of fertilisers on behalf of the State Government ". It is urged that the District Co-operative Marketing Societies act only as monopoly stockists of fertilisers for and on behalf of the State Government and there was, in fact, no purchase of fertilisers by the District Co-operative Marketing Societies in the sense the expression " purchase " is commercially understood. The assessee merely acted as an agent of the Government for the supply of fertilisers. On these facts, it is urged that the assessee did not purchase fertilisers and sell the same. Unless the assessee-society was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r the assessee alternatively contended that, in any event, the assessee is entitled to claim deduction of the profit attributable to the supply of fertilisers to its members under s. 80P(2)(a)(iv) and also claim, in addition, the deduction of profit under s. 80P(2)(c) in respect of transactions with non-members. Learned counsel urged this alternative plea without prejudice to the main contention that the entire profit derived by the assessee on the purchase and supply of fertilisers to members as well as non-members is deductible under s. 80P(2)(a)(iv). We may quote the relevant portion of the G. O. Ms. No. 541, dated March 7, 1964, relating to the agency for distribution and supply of fertilisers to the District Co-operative Marketing Societies: " I. Scheme for distribution of fertilisers to the members of Co-operative Societies : (i) Agency for distributing chemical fertilisers : The agency for distribution of fertilisers shall be the District Cooperative Marketing Societies assisted by the village credit societies and primary Co-operative Marketing Societies. (ii) Supply of fertilisers to District Co-operative Marketing Societies terms and conditions: (a) The D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Government has been supplying fertilisers to the District Co-operative Marketing Societies on consignment-cum-credit basis, that is to say, without having to pay cash towards the consideration of the fertilisers before taking delivery. There is a further provision that the societies shall pay interest to the Government at the rate of 3 1/2% per annum on the value of stocks of fertilisers from the date of taking delivery to the date of actual payment of cost of stocks to the Government. This provision gives a clue to the real relationship between the Government and the District Co-operative Marketing Societies. The moment the fertilisers are delivered to the District Co-operative Marketing Societies, the societies are treated as debtors to the Government for the value of stocks of fertilisers supplied and from the date of delivery to the date of actual payment, the societies are obliged to pay interest to the Government at 3 1/2% per annum. This obligation to pay interest on the unpaid consideration is consistent with the treatment of societies as debtors to whom fertilisers were supplied. There is a further provision that the societies shall remit to the Government the cost of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee entered into an agreement with Caltex (India) Ltd., for the supply of petrol and petroleum products on certain conditions. The assessee paid the price of the supplies made by Caltex (India) Ltd., almost within month from the date of delivery of the goods. The assessee sold the products to its customers and issued cash memos in its own name without mentioning that the goods sold belonged to Caltex (India) Ltd. The assessee had to bear the losses due to leakage, drainage, evaporation, etc., during the course of storage at the pumps of the assessee and the company did not reimburse the assessee for such losses. The assessee had to sell the goods within the territory at the price fixed by the company and the company agreed to reimburse the assessee in full for the supplies and to pay the assessee the transportation expenses and handling allowances. The question arose whether the contract entered into by the assessee with Caltex (India) Ltd., was a pure and simple contract of agency or whether it was a contract for sale of goods. After examining the above terms of the agreement, the Supreme Court held that, after taking delivery of the goods from Caltex (India) Ltd., the assessee was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upply and Marketing Federation Ltd. v. CIT [1981] 128 ITR 189 (P H), in support of the plea that there was merely a contract of agency and there was no purchase of goods by the assessee-society from the Government. We have gone through the judgment carefully and we find that the facts in that case are totally distinguishable. We may refer to clause 14 of the agreement in that case, which clearly states that the Marketing Federation shall store and " sell the fertilisers on behalf of the Government ". This very crucial clause in that case which led to the conclusion that the Marketing Federation was not acting in its own right but only on behalf of the Government is expressly provided in the agreement. At page 205 of the report, the High Court referred to various clauses in the agreement which put certain restrictions on the Marketing Federation and the entire control regarding all the matters dealt with rested with the Registrar of Co-operative Societies or his nominee. The Marketing Federation did not enjoy unfettered liberty to deal with the goods as its own. Because of these restrictions in the agreement in that case, the High Court came to the conclusion that the Marketing Fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hold that the provisions contained in s. 80P(2)(a)(iv) are clearly applicable to the assessee-society and the Revenue was in error in taking the contrary view. The above finding does not, however, solve the problem. Learned counsel for the assessee contends that the whole of the amount of profits of the business in fertilisers carried on by the assessee qualified for deduction under s. 80P(2)(a)(iv). The argument of the learned counsel, Sri Srirama Rao, proceeds on the basis that the provision is to exclude the profits and gains of the business in respect of the purchase of the fertilisers and it is immaterial whether that profit arises on sale to members or to non-members and so long as the profit is referable to the purchase of fertilisers, the assessee is entitled to claim deduction of the whole of the amount of profit from its gross total income. We are unable to accept this contention. The sanction for deduction under s. 80P(2) is in respect of " the whole of the amount of profits and gains of business attributable to any one or more of such activities ". The expression " such activities refers to the activities specified in s. 80P(2)(a) of the Act. We are concerned with t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d rupees. Inasmuch as transactions with non-members fall outside the scope of clauses (a) and (b), a co-operative society will be entitled to claim deduction under clause (c) in respect of its profits in transactions with non-members. Indeed, the learned counsel for the assessee, Sri Srirama Rao, contended alternatively that, in case we hold that, under s. 80P(2)(a)(iv), the assessee is entitled to claim deduction of only the profit attributable to the business carried on with the members, then the assessee would be entitled to further deduction to the extent of not more than Rs. 20,000 under clause (c) of sub-s. (2) of s. 80P in respect of the assesses transactions with non-members. In our opinion, the learned counsel for the assessee is correct in his submission that the assessee in the present case will be entitled to claim in addition to the deduction under s. 80P(2)(a)(iv), to the extent of the profits and gains attributable to the business in fertilisers carried on by the assessee with non-members subject to the maximum of Rs. 20,000. In the result, we answer the question referred to us in the following terms : The assessee is entitled to claim deduction, under s. 80P(2)( ..... X X X X Extracts X X X X X X X X Extracts X X X X
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