TaxTMI 
TaxTMI 
2015 (2) TMI 163
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....tion of the society and accepted by the department which is not in accordance with Law. 3. The learned CIT(A) upheld the proceedings initiated u/s 147 and the reasons for reopening the assessment and at the same time deleted assessment which was based on the same reasons recorded. - 4. The Learned CIT(A) ignored the fact that sale of salt was declared in the VAT returns as that of the assessee-society and the profit belonged to the assessee and liable to tax only in the hands of the assessee before distribution to the members. 5. The Learned CIT(A) erred in not considering that the claim of expenditure by way of transfer of "net sales" to distribution pool fund being a self-imposed obligation is not authorised and not allowable under any provisions of Income tax Act 6. The Learned CIT(A) erred in applying ratio of Radhasoami satsang vs CIT (1992) 193 ITR 321 (SC) which dealt with the issues of entitlement to exemption under sections 11 and 12 of the Income-tax Act of 1961, wher....
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.... society from the very beginning. Prior to this society, the co-operative that existed since 19O4 was Sanikatta Co-operative Salt Sale Society Ltd , Sanikatta which was a cooperative of salt producers which only facilitated the sale of salt produced by its members The earlier society was not in production of salt. 4. The Assessing Officer observed that the assessee Society is not engaged in the business of mere marketing of salt produced by the members or providing facilitates to the members to produce salt. It is the case of income from manufacture and sale of salt being transferred to distribution pool fund account before offering to tax and hence there is income chargeable to tax which has escaped assessment. The transfer to the fund and subsequent distribution to members before payment of tax is not a deductible expenditure and the amount appropriated by the assessee out of its income and credited to the distributable pool fund account cannot become a deduction for the society. Hence, the income of the society from its business of manufacture and sale of salt has escaped assessment. With these observations, the AO took appropriate actions in the respective years for initiati....
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....nufacturing salt on cooperative basis and Under clause (c), the role of the society is to consolidate and remodel the salt workers so as to manufacture salt and bye products economically and on a scientific basis and to manufacture table salt and high purity salt. In view of the above objects, it was submitted that the AO‟s view that the lands surrendered come under cooperative ownership and members do not have any claim on the salt produce are not correct. It was submitted that none of the bye laws of the society are against any provisions of Income tax Act or Constitution of India or other enactments of Parliament. The totality of the bye law leads to formation of the society and the undertaking between the members the society and the society. It was submitted that the ownership of surrendered lands still vests with the members do not disqualify the assessee society from offering the income generated from the land to tax duty complied with since the assessee‟s share of the income generated in the form of commission is offered in the assessee‟s hands while that of the embers is offered in their respective hands, There is no violation on this account also. It is e....
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....rated as income of the appellant. It is point worth noting that the members have offered the income in their hands. Taking strength from the decision of the Hon'ble Supreme Court in the case of Radhasoanv Satsang (293 ITR 321), I do not find any infirmity n the accounting of the appellant also, since I am of the view that the members have right by overriding title on the income generated and considering the totality of the bye laws the appellant is eligible only for commission part of ft. Hence, I find strength in the argument of the appellant that what can be taxed in the hands of the appellant, even on real income concept, is only the commission and accordingly allow the appeal." 8. Aggrieved by the order passed by ld CIT(A), the revenue is in appeal before us. 9. At the time of hearing, ld D.R. relied on the order of the Assessing Officer. 10. On the other hand, ld counsel for the assessee reiterated the submissions made before the authorities below. Before us, assessee filed written submissions as under: "The Co-op society was formed on 08.05.1952 & is registered under Bombay Co-op societies Act on 1....
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....lt and other bye products in these areas on co-operative basis ii) Bye law Na 4 (m) - To help members in getting a fair price for the salt & by products produced by the society on their behalf. iii) bye law No 4 (q) - To sell the salt & bye products directly or through agents. iv) Bye law No. 4 (Q - Society pays on behalf of members the assessment & mulgine rent v) Bye law(n No 4 (ii) - To recover all manufacturing exps of the society & other dues from the individual members from time to time. vi) Bye law Mo 4 ( w) .- To undertake such other work, measures, activities as will be conducive to the economic well being of the members. vii ) Bye law No. 9 (d) - No person shall be a member unless he surrenders his individual right of manufacture of salt to the society for the purpose of joint manufacture of salt & by products by the society. vii ) Bye Jaw No, 58 (h) - The interest of each member in common produce....
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....nbsp; vi) CIT v A. Tosh & Sons (P) Ltd, 166 ITR 867 (Cal) vii) Jit & Pal X - Rays (P) Ltd v CIT 267 ITR 370 (All) viii) Radha soarni Satsang v CIT 193 ITR 321 (SC) 12. Having heard the rival submissions and perusing the materials on record, we find no infirmity in the well reasoned order of ld CIT(A) to interfere. We also find that ld CIT(A) has categorically discussed every points raised by the Assessing Officer and also the submissions of the assessee in the impugned order. We have also gone through the written submissions filed by the assessee before us, wherein, in different bye laws, the objectives of the society are mentioned. We find that the clauses mentioned in the bye laws of the society are supplementary and complimentary to clauses 4(a) & 4(q). In fact clause 4(i) stipulates that the society pays on behalf of the members the assessment and malign rent. This also shows that the society is only managing the whole activity on behalf of the members to maximize the profits in the most beneficial way to the members. This activity is carried on for last several years and even before the operation of the present IT Act, which is IT Act....