COMMISSIONER OF INCOME TAX Vs. KARJAN CO OP COTTON SALE GINNING AND PRESSING SOCIETY LIMITED

JUDGEMENT

(1.) IN this case , at the instance of the revenue, the following two question have been referred to us for our opinio :

(2.) THE assessment year under reference is 1970 -71, the relevant previous year being the year ending 31 st October, 1969. The assessee is a co -operative society constituted under the provisions of the Co -operative Societies Act. It derives income from ginning and pressing of cotton received from its members and others and it also carries on activities of marketing cotton. The question arose before the ITO whether the commission earned by the assessee -society for marketing the cotton of its members would be exempt under s. 80P of the I.T.Act, 1961, the incomme being commission charges received by it from its members. The ITO held that this exemption was not available to the assessee -society on the ground that the cotton marketed by the society ceased to be the agricultural produce on account of process of ginning and pressing and, secondly, besides the members of the assessee -society, others also gave cotton to the assessee and, therefore, the cotton marketed by the assessee was not the cotton belonging to the members of the asseessee -society. On appeal by the assessee, the AAC disagreed with the view of the ITO and held that the society was entitled to the exemption in respect of the commission on marketing the cotton of its members. On appeal by the revenue against the decision of the AAC, the Tribunal unpheld the decision of AAC and dismissed the appeal on this point.

(3.) AGAINST the decision of the AAC, the revenue took the matter to the Income -tax Appellate Tribunal and the Tribunal upheld the conclusion of the AAC. According to the Tribunal, these amounts were received either by way of interest of godown charges for the payments made by the members. These amounts, in its opinion ,could not be divorced from the main source, namely, the sale proceeds received from the members. If any member were to make good the payment within the due date, he or it was required to pay the sale price. In the case of delayed payments, however, the society would recover interest as well as godown charges over and above the sale price. This is the normal commercial parctice in cases where, according to the Tribunal, goods are sold on credit and the customers do not pay their outstanding by the due date. The Tribunal, therefore, agreed with the AAC that the impugned amounts were exempt under s. 80P(2)(a)(i) of the Act. The insurance bonus was nothing but recovery of insurance charges paid by the assessee which formed part of the expenditure incurred by the society in the course of it business which was found to be exempt from tax. The Tribunal, therefore , dismissed the revenue's appeal so far as this amount was concerned. Thereafter, at the instance of the revenue, the two questions hereinabove set out have been referred to us for our opinion.