Pathak, C. J. - (1.) This appeal by certificate granted by the High Court of Madras is directed against the judgment of the High Court disposing of a reference in favour of the assessee and against the Revenue.
(2.) The respondent assessee is a co-operative society registered under the Madras Cooperative Societies Act. The assessee entered into an agreement with the State Government during the previous year ending 30th June, 1960, relevant to the assessment year 1961-62, whereby the assessee agreed to hold a stock of ammonium sulphate belonging to, and on behalf of, the State Government, and to store it in godowns which admittedly belonged to the assessee. Under the agreement, the assessee was required further to take all necessary steps to enable such stocking and storage of the fertiliser, including taking delivery of the stock at the rail-head and transporting it to the godowns. During the previous year relevant to the assessment year 1961-62 the assessee received a sum of Rs. 31,316/ -, on this account, the amount being described as a commission.
(3.) In assessment proceedings for the assessment year 1961-62 the assessee claimed exemption from tax under S. 14(3)(iv) of the Indian Income Tax Act, 1922 in respect of the said sum of Rs. 31,316/-. The Income-tax Officer denied the exemption, and on appeal ,.the Appellate Assistant Commissioner of Income-tax confirmed the denial. But on second appeal by the assessee, the Income-tax Appellate Tribunal held that the various terms of the agreement with the State Government constituted consideration for letting the godowns, and that any servicing done in that connection represented an insignificant part of the ' entire transaction. In the result, the Appellate Tribunal allowed the appeal and granted the exemption claimed by the assessee. At the instance of the Revenue, the Income-tax Appellate Tribunal referred the following questions to the High Court of Madras:- "1. Whether, on the facts and in the circumstances of the case, the sum of Rs. 31,316/- received by the assessee Society from the Madras Government under an agreement for stocking and distribution of ammonium sulphate was exempt under S. 14(3)(iv) of the Indian Income Tax Act, 1922 2. Whether, on the construction of the agreement between the assessee and the State Government, the Appellate Tribunal's finding that the receipts were mostly for letting out the godowns and that the servicing was An insignificant portion of the whole amount is reasonable and consistent with the material on record -;