Statutory division of a co-operative society ended old identity; earlier exemption notification gave way to section 80P under the 1961 Act.

Statutory division of a co-operative society was treated as the extinction of the old entity and the creation of a new one, so a society freshly registered in 1968 could not claim continuity with the society formed in 1948 or rely on the earlier exemption notification. The earlier 1922 Act notification was held to survive only where the Income-tax Act, 1961 had made no specific provision; because section 80P dealt expressly with co-operative society deductions, the notification did not continue to operate for societies registered after the new Act commenced. The society could still seek deduction under section 80P, and that claim was left for fresh consideration.

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Issues: (i) Whether the assessee-society remained the old society formed in 1948 or became a new society on its division and registration in 1968, and whether it could therefore claim exemption under the earlier notification. (ii) Whether the notification issued under the 1922 Act continued to protect co-operative societies registered after the Income-tax Act, 1961 came into force, in view of section 80P and the saving provision in section 297.

Issue (i): Whether the assessee-society remained the old society formed in 1948 or became a new society on its division and registration in 1968, and whether it could therefore claim exemption under the earlier notification.

Analysis: The relevant distinction was between transfer and division. A transfer involves making over assets or liabilities from one continuing legal person to another, whereas division extinguishes the identity of the original society and brings into existence separate entities. The scheme, the Registrar's sanction, cancellation of the old registration, and fresh registration of the assessee showed a statutory division under the Gujarat Co-operative Societies Act, not a mere partial transfer. Once the old society's registration stood cancelled and it was dissolved, the assessee could not be treated as the same society that had originally been registered in 1948.

Conclusion: The assessee was a new society formed in 1968 and was not entitled to claim the old exemption on the footing of continued identity.

Issue (ii): Whether the notification issued under the 1922 Act continued to protect co-operative societies registered after the Income-tax Act, 1961 came into force, in view of section 80P and the saving provision in section 297.

Analysis: The notification survived only to the extent that no provision had been made under the Income-tax Act, 1961. Since section 80P specifically dealt with deductions for co-operative societies, the earlier concession could not continue for societies registered after the new Act commenced. The saving clause in section 297 did not preserve the notification beyond the field occupied by the 1961 Act. Accordingly, a society newly registered in 1968 could rely on section 80P for deduction, but not on the earlier exemption notification.

Conclusion: The notification did not continue to confer exemption on the assessee, though the assessee remained entitled to claim deduction under section 80P.

Final Conclusion: The appeals succeeded on the substantive exemption issue, but the assessee's claim for deduction under section 80P was left for fresh decision by the first appellate authority.

Ratio Decidendi: Where a co-operative society is statutorily divided, the old society stands dissolved and a newly registered society cannot claim the benefit of an earlier exemption notification if the Income-tax Act, 1961 has made specific provision on the same subject, the earlier notification surviving only to the extent not covered by the new Act.

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