- (1.) In all these appeals, the question for decision is whether compulsory deductions made by sugar co-operative societies on account of non-refundable and refundable deposits and other Funds are revenue receipts liable to be taxed under the Income Tax Act.
(2.) The appellants in the first batch of appeals are registered Co-operative Societies governed by the provisions of Maharashtra Co-operative Societies Act, 1960 (hereafter referred to as the Act). The affairs of these societies are regulated by the bye-laws framed or adopted by the Societies in accordance with the procedure laid down under the Act.
(3.) The appellant in each of the appeals carries on the business of manufacturing sugar. Its members are predominately sugarcane farmers. According to the policy of the Government, the sugarcane growing areas in the State of Maharashtra have been divided into different territorial units. Each unit has a factory for manufacturing sugar and the sugarcane growers within the territory are obliged to sell their sugarcane only to the said factory. The project cost of the appellant was met partly by share capital and partly by way of Capital Subsidy provided by either the Central Government (Ministry of Industrial Development) or financial institutions such as IDBI, IFCI, etc. The share capital was contributed not only by the members but also by the State Government. So long as the State Government held share capital in the Society, the Government was entitled to fix the sugarcane price which it did. The bye-laws provided for deduction of amounts towards refundable and non-refundable deposits from the cane price payable to the grower members. There were also instructions of the Director of Sugars to this effect. Apart from that, pursuant to the orders passed or circulars issued by the State Government/Director of Sugars, amounts were being deducted for being credited into various Funds such as Chief Ministers Relief Fund, Y.B. Chavan Memorial Fund, Area Development Fund etc. The amounts credited to these Funds are meant to be utilized either by the Society directly as per the guidelines issued by the Director or remitted to the Government or trustees for socio-economic development of the operational area. Till the assessment year 1984-85, these collections/deposits were not treated as income on the assessee on the footing that they, were not trading receipts.;