TaxTMI 
TaxTMI 
1982 (3) TMI 186
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....ilable to the assessee in respect of all the transactions and further in determining such profits expenditure could not be bifurcated between activities relating to the members and those relating to non-members. The matter went up to the Appellate Tribunal and in IT Appeal No. 73 (Nag.) of 1980 the Tribunal concurred with the Commissioner (Appeals). For the year under consideration the learned Commissioner (Appeals) upheld the view canvassed on behalf of the assessee. The revenue urged that the decision of the Tribunal in IT Appeal No. 73 (Nag.) of 1980 was not correct and required a revision. Accordingly, the matter was referred to the President who constituted a Special Bench for disposing of the appeal for the assessment year 1974-75, for a decision on the following issues: 1. Whether the deduction under section 80(P)(2)(a)(iv) is available to the assessee in respect of trading with non-members ? 2. Whether the deduction has to be granted with reference to the net profit and not the gross profit ? 2. The facts of the case are as follows: The assessee is a co-operative society registered under the Maharashtra Co-operative Societies Act, 1970. The objects of the societ....
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....bsp; Gross Percentage of Claim of the sale profit sales to mem- assessee &nb....
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....bsp; 1,16,677.98 machinery like Pumps, Motors, Crushers, etc. Sugar 23,72,071.07 32,056.65 17 ---- Barbed--- 13,106.33 1,891.55 69.7 1,891.55 wire for fencing Gunny bags  ....
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....p; 92 13,256.26 for sheds ------------------------------------------------------------------------------------------------------------------ 1,12,80,503.00 4,32,749.35 55 4,04,547.96 ------------------------------------------------------------------....
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....sp; 21,903 12,589 3. Cloth 2,076 1,474 ------------------ &n....
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....r cent of the G.P. 3. Cloth 602 29 per cent of the G.P. ------------------- 2,51,449 &nb....
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....bsp; ------------------- 1,29,622 &....
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.... 118 ITR 243 was applicable to the present case. He noticed that the Supreme Court did not refer to section 80P(2) in the penultimate paragraph of its judgment at page 260. However, he held that the absence of reference to section 80P could not render the decision inapplicable to the assessee's case, as, many other sub-sections have also not been referred to in that para. The basic question being whether relief should be given on the gross or the net income and the Supreme Court having decided that relief should be given on the gross income, the learned Commissioner (Appeals) held that the assessee was entitled to relief on the gross profit earned by the society in its transactions. 5. We also now refer to the decision of the Tribunal in this very case, for the assessment year 1975-76. The Tribunal held that the decision of the Gujarat High Court in Sabarkantha Zilla Kharid Vechan Sangh Ltd. was not applicable since that decision was on the interpretation of section 81(1)(d) which has subsequently been deleted. The Tribunal, accordingly, declined to examine in detail the Gujarat High Court's decision. Similarly, the decision in Chatrapati Shivaji Sahakari Sakhar Karkhana Ltd. wa....
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....er section 80P(2)(a), there is no scope for giving relief under section 80P(2)(c). Section 80P(2)(c) is thus rendered redundant. The principle of harmonious construction required that income relating to activities under section 80P(2)(a) and activities under section 80P(2)(c) have to be separately determined. Relief under section 80P(2)(c) will have to be restricted to Rs. 20,000. 8. The learned departmental representative then referred to the definition of 'total income' under section 80B(5) of the Act. The gross total income meant the total income computed in accordance with the provisions of this Act. There is thus no scope for giving relief on the gross profit as that would mean computation of the total income contrary to the scheme laid down in the Act. 9. The learned departmental representative then submitted that the Tribunal was not right in brushing aside the decision of the Gujarat High Court in Sabarkantha Zilla Kharid Vechan Sangh Ltd. on the ground that section 81(1)(d) was no longer on the statute book. The wordings of section 80P(2)(a) were exactly the same as those of section 81(1)(d). When the two sections are pari materia, the decision on one cannot be ignor....
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....ii) a cottage industry, or (iii) the marketing of the agricultural produce of its members, or (iv) the purchase of agricultural implements, seeds, livestock or other articles intended for agriculture for the purpose of supplying them to its members, or (v) the processing, without the aid of power, of the agricultural produce of its members, or (vi) the collective disposal of the labour of its members, or (vii) fishing or allied activities, that is to say, the catching, curing, processing, preserving, storing or marketing of fish or the purchase of materials and equipment in connection therewith for the purpose of supplying them to its members, the whole of the amount of profits and gains of business attributable to any one or more of such activities : Provided that in the case of a co-operative society failing under sub-clause (vi), or sub-clause (vii), the rules and bye-laws of the society restrict the voting rights to the following classes of its members, namely:--- (1) the individuals who contribute their labour or, as the case may be, carry on the fishing or allied activities; (2) the co-operative credit societies which provide financial assistance to th....
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....n 80-I or section 80JJ or section 80JJA, the deduction under sub-section (1) of this section, in relation to the sums specified in clause (a) or clause (b) or clause (c) of sub-section (2), shall be allowed with reference to the income, if any, as referred to in those clauses included in the gross total income as reduced by the deductions under section 80HH, section 80HHA, section 80-I, section 80J, section 80JJ and section 80JJA." We find that a co-operative society can engage itself in various activities. These have been classified under section 80P(2)(a), (b) and (c). In particular we refer to section 80P(2)(c) which refers to activities other than those specified in clause (a) or (b), either independently of, or in addition to, all or any of the activities so specified. Thus, obviously, activities other than those relating to purchase of agricultural implements, seeds, livestock or other articles intended for agriculture, for the purpose of supplying them to its members, like supplying the same articles to non-members, would fall within section 80P(2)(c). The section requires that the profits and gains attributable to such activities should separately be determined. Hence, t....
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....gs specified in items 2 and 3, item 4 (excluding alloy, malleable and S.G. iron castings), items 7 to 15 (both inclusive), items 17 and 18, item 23 (excluding refractories) and items 24, 26, 27, 29 and 33 in the list in the Ninth Schedule. (b) in respect of such income by way of dividends other sixty per cent of than the dividends referred to in clause (a) such income ; (2) Where a company to which this, section applies is entitled also to the deduction under section 80K, the deduction under sub-section (1) shall be allowed in respect of income by way of dividends referred to therein as reduced by the amount of the deduction under section 80K." Here the Supreme Court held that the opening part of the section does not have a limitative effect and they are descriptive of items of income included in the total income and are not indicative of the quantum of amount included under different items in the computation of the total income. The section star....
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.... of sugar constituted one business. That finding had not been challenged before the Supreme Court. Hence, the entire managing agency commission was held to be business expenditure. The question of determining separately income attributable to agricultural activities and income attributable to business activities, did not arise. The entire income was held to be business income and while determining the business income, a part of the managing agency commission was sought to be disallowed as relating to agricultural operations. Since there was no finding of fact that the cultivation of sugarcane and the manufacture of sugar constituted different activities, the question of disallowing a part of what was admittedly a business expenditure, as not relating to business, did not arise at all. In the present case, the total income is to be determined in accordance with the provisions of this Act. Then the portion of income which is attributable to certain specified activities of the co-operative society has to be taken out as a deduction from the total income. The section itself imposes a duty on the ITO to determine the profits and gains attributable to such activities as are mentioned in ....