TMI Blog2008 (3) TMI 278X X X X Extracts X X X X X X X X Extracts X X X X ..... Though the cause-title shows revenue being the applicant in fact there are cross-references, both by the assessee and the revenue. 2. The Income-tax Appellate Tribunal, Ahmedabad Bench 'B' has raised and referred the following question under Section 256(1) of the Income-tax Act, 1961 ("the Act") at the instance of the Commissioner of Income-tax: "Whether the Appellate Tribunal is right in law and on facts in confirming the order made by the Commissioner of Income-tax (Appeals) deleting the addition of 6,02,03,652 representing the alleged additional price of milk, paid to the member co-operative societies on the last day of the accounting year?" 3. It is an admitted position between the parties that identical issue had come up in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heard together wherein identical two questions have been raised and referred for the opinion of this Court. 6. It was submitted on behalf of the applicant-assessee that Section 67 of the Gujarat Co-operative Societies Act, 1962 ("the Co-operative Societies Act") requires every society to maintain a reserve fund where the society derived or can derive profits from the transactions carried on by the society. For the purposes of constituting such a reserve fund, according to Mr. Shah, under sub-section (2) of Section 67 of the Co-operative Societies Act at least one-fourth of the net profits of the society are required to be carried to the reserve fund every year, but such reserve fund is not a free fund and hence, before the profits are t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty was an outgoing in so far as the society was concerned and hence, being a statutory expense, was an allowable deduction. In support of the submissions reliance was also placed on Section 115 of the Co-operative Societies Act. 7. As against that on behalf of the Revenue Mr. M. R. Bhatt, learned Senior Standing Counsel, invited attention to the Apex Court decision in the case of Associated Power Co. Ltd. Vs. Commissioner of Income-tax, [1996] 218 ITR 195, to submit that in similar situation, merely because there is a statutory liability to transfer a part of the profits neither can the profits be exempted from tax on the ground of diversion at source by overriding title nor can such amount be treated as a deductible expenditure. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g 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. 10. Accordingly, the Tribunal was right in law in holding that the amount transferred to the reserve fund account as per provisions of Section 67 of the Gujarat Co-operative Societies Act, 1962 was not diversion of income at source by overriding title nor can such transfer be treated as a business expenditure deductible either under Section 28 or Section 37 of the Act. Accordingly, both the questions at the instance of the assessee are answered in the affirmative i.e. in favour of the Revenue and against the assessee. 11. The reference stands disposed of accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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