AHMEDNAGAR CENTRAL COOPERATIVE CONSUMERS WHOLESALE AND RETAIL STORES LTD. VS COMMISSIONER OF INCOME-TAX
1999 P T D 1605
[227 I T R 458]
[Bombay High Court (India)]
Before Dr. B. P. Saraf and Dr. Mrs. P.D. Upasani, JJ
AHMEDNAGAR CENTRAL COOPERATIVE CONSUMERS WHOLESALE AND RETAIL STORES LTD.
Versus
COMMISSIONER OF INCOME-TAX
Income-tax Reference No.84 of 1988, decided on 04/04/1997.
Income-tax---
----Cooperative society---Special deduction---Profits and gains attributable to actual sales of specified commodities to its members is entitled to special deduction---Indian Income Tax Act, 1961, S.80-P.
A plain reading of section 80-P of the Income Tax Act, 1961, makes it clear that a cooperative society is entitled to exemption in respect of its income from activities falling under section 80-P with its members to the extent indicated in the said section. The correct approach would be to grant exemption to the whole amount of profits and gains attributable only to actual sales of specified commodities to members, irrespective of the original intention at the time of purchase. The original intention of the society at the time of purchase of the items is not the deciding factor. ,
CIT v. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd. (1994) 209 ITR 481 (Bom.) fol.
Held, that, in the instant case, it was not clear from the statement of the case or from the orders of the authorities below including the Tribunal as to what were the trading activities undertaken by the assessee. However, relief had been given under section 80-P(2)(c). The ends of justice would be met if the matter were remitted to the Tribunal to examine the claim of the assessee for deduction under section 80-P in the light of the decision of the High Court in CIT v. Nagpur Z.K.A. Sahakari Sangh Ltd. (1994) 209 ITR 481 and if the assessee was entitled to any relief over and above what had been granted to it, to allow the same. [Matter remanded.]
C.P. Deogirikar for the Assessee.
Dr. V. Balasubramanian with J.P. Deodhar for the Commissioner.
JUDGMENT
DR. B. P. SARAF, J.---By this reference under section 256(1) of the Income Tax Act, 1961, made at the instance of the assessee, the Income tax Appellate Tribunal has referred the following question of law to this Court for opinion:
"Whether the applicant cooperative society is entitled to exemption from income-tax under the principle of mutuality?"
This reference pertains to the assessment year 1980-81. The assessee is a cooperative society registered under the Maharasthra Cooperative Societies Act and carries on trading activities with its members as well as non-members. In its assessment for the assessment year 1980-81, the assessee claimed exemption in respect of the profits arising out of the trading activities carried on by it on the principle of mutuality. The Income-tax Officer allowed the exemption. However, the Commissioner of Income-tax revised the order of the Income-tax Officer in exercise of powers of suo motu revision under section 263 of the Income Tax Act, 1961 ("the Act"), as he was of the opinion that the society did not satisfy the principle of mutuality. The assessee appealed to the Tribunal against the above order of the Commissioner of Income-tax. The Tribunal dismissed the appeal of the assessee and confirmed the order of the Commissioner. Hence, this reference at the instance of the assessee.
Learned counsel for the parties are agreed that the controversy in this case now stands concluded by the decision of this Court in CIT v. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd., (1994) 209 ITR 481, and following the same in the instant case, the assessee will be entitled to exemption under section 80-P of the Act in respect of profits attributable to dealings with its members and in that view of the matter, it should be held that the assessee is entitled to exemption in respect of profits attributable to the dealings of the assessee society with its members under section 80-P of the Act.
We have carefully considered the above submission of counsel for the assessee which is supported also by counsel for the Revenue. From the above submission of counsel for the assessee, it is clear that the only relief the assessee claims is exemption under section 80-P of the Act on the basis of the decision of this Court referred to above in respect of profits arising from trading activities with its members and does not want to pursue its claim on the ground of mutuality. To decide this claim of the assessee for exemption under section 80-P of the Act, we have perused section 80-P of the Act and also the decision of this Court in CIT v. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd. (1994) 209 ITR 481. Section 80-P, at the material time, so far as relevant, read as follows:
"80-P. Deduction in respect of income of cooperative societies. ---(I) Where, in the case of an assessee being a cooperative society, the gross total income includes any income referred to in subsection (2), there shall be deducted, in accordance with and subject to the provisions of this section, the sums specified in subsection (2), in computing the total income of the assessee.
(2) The sums referred to in subsection (1) shall be the following,namely:---
(a) in the case of a cooperative society engaged in---
(i) carrying on the business of banking or providing credit facilities to its members, or
(ii) a cottage industry, or
(iii) the marketing of the agricultural produce of its members, or
(iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or
(v) he processing, without the aid of power, of the agricultural produce of its members, or
(vi) he collective disposal of the labour of its members, or
(vii) fishing or allied activities, that is to say, the catching, curing, processing,preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to 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 cooperative society falling under sub clause (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 cooperative credit societies which provide financial assistance tothe society;
(3) the State Government;
(b) in the case of a cooperative society, being a primary society engaged in supplying milk, oilseeds; fruits or vegetables raised or grown by its members to---
(i) a federal cooperative society, being a society engaged in the business of supplying milk, oilseeds, fruits or vegetables, as the case may be; or
(ii) the Government or a local authority; or
(iii) a Government company as defined in section 617 of the Companies Act, 1956 (1 of 1956), or a corporation established by or under a Central, State or Provincial Act (being a company or corporation engaged in supplying milk, oilseeds, fruits or vegetables, as the case may be, to the public),
the whole of the amount of profits and gains of such business;
(c) in the case of a cooperative society engaged in activities other than those specified in clause (a) or clause (b) (either independently of, or in addition to, all or any of the activities so specified), so much of its profits and gains attributable to such activities as does not exceed,---
(i) where such cooperative society is 'a consumers cooperativesociety, forty thousand rupees; and
(ii) in any other case, twenty thousand rupees
Explanation.---In this clause, 'consumers' cooperative society means a society for the benefit of the consumers; ...."
From a plain reading of the above section, it is clear that exemption is granted to cooperative societies under the Income-tax Act, in respect of income specified therein subject to the conditions and to the extent set out in the said section.
In the instant case, the assessee is a cooperative society. It claims that it cannot be denied exemption under section 80-P of the Act in respect of sales of commodities made by it to its members on the ground that it is also engaged in selling those commodities to non-members. Reliance is placed in support of this contention on the decision of this Court in CIT v. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd. (1994) 209 ITR 481. We have carefully perused the above decision of this Court. In that case, this Court, on perusal of section 80-P of the Act, has held (page 485):
"All sales of specified commodities to members irrespective of their proportion and quantum--would belong to the exempted category and all such sales to non-members irrespective of their proportion and quantum---would belong to the non-exempted category."
It was observed by this Court in the above case that the original intention of the society at the time of purchase of the items was not the deciding factor. It was held that the correct approach would be to grant exemption to the whole amount of profits and gains attributable only to actual sales of specified commodities to members, irrespective of the original intention at the time of-purchase. It is clear from the above decision that a cooperative society is entitled to exemption in respect of its income from activities falling under section 80-P of the Act with its members to the extent indicated in the said section.
In the instant case, it is not clear from the statement of the case or from the orders of the authorities below including the Tribunal as to what were the trading activities undertaken by the assessee. We, however, find from the order of the Tribunal that the assessee was given relief by the authorities below under section 80-P(2)(c) of the Act. If that is so, the assessee would not be entitled to any more relief on the basis of the decision of this Court referred to above. However, counsel for the assessee contended before us that as material facts are not before us, this matter should be remitted to the Tribunal to give relief to the assessee under section 80-P of the Act in respect of profits derived by it from trading activities with its members. In view of the peculiar facts and circumstances of this case, we are of the opinion that ends of justice will be met if the matter is remitted to the Tribunal to examine the claim of the assessee for deduction under section 80 P of the Act in the light of the decision of this Court in CIT v. Nagpur Zilla Krishi Audyogik Sahakari Sangh Ltd. (1994) 209 ITR 481, and if the assessee is entitled to any relief over and above what has been granted to it, to allow the same. We order accordingly. In the facts and circumstances of this case, we make no order as to costs.
M.B.A./2019/FCOrder accordingly