BIHAR RAJYA SIKSHAK SAHYOG SANGH LIMITED Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THESE are three references under S. 256(1) of the IT Act, 1961 (hereinafter to be referred to as " the Act "). They relate to the asst. yrs. 1971 -72, 1972 -73 and 1973 -74. The accounts of the assessee showed that the assessee had made profits of Rs. 5,800, Rs. 2,641 and Rs. 9,726 by indulging in trade with the members of the assessee during the three assessment years respectively.

(2.) THE assessee is a registered co -operative society. Its members are of two categories: (i) other co -operative societies of teachers, and (ii) individual teachers. The assessee gets text books from the Government at concessional rates and sells them to any person who buys them as also to the members of the society at a discount. During the assessment proceedings, the stand of the assessee was that the profits earned by sales to the members of the society was not taxable as it was not the income of the society. The surplus from trading with members had been arrived at by taking proportionate profit on sales to the members. The surplus worked out, as mentioned above, in the three years is under consideration. The claim of the assessee was rejected at all stages. Hence, the present references under S. 256(1) of the Act. The question referred to us for our opinion is as follows :

(3.) THE question referred to us is really concluded by a decision of this Court in the case of Jamshedpur Co -operative Stores Ltd. vs. CIT (1985) 49 CTR (Pat) 134:(1986) 157 ITR 127 (Pat). That case also related to a co -operative store. In that case, the question was " whether subsidy or grant from non -members was income of the assessee ? " In that connection, it was considered whether there was mutuality between the society and the members and it was held in that case that since there did not exist complete identity between the contributors and the participators, the principle of mutuality was defeated. In that case, the contributors were the individuals indulging in buying goods from the co -operative stores. Not only the members of the society but every employee of TISCO and other factories at Jamshedpur were entitled to purchase. Thus the identity was lost. That having been lost, the assessee was not entitled to claim exemption from tax on the ground of mutuality.