TaxTMI 
TaxTMI 
1989 (2) TMI 3
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....ess and would thus be exempt under section 14(3) of the Indian Income-tax Act, 1922 ? At the hearing, it has been clarified by counsel for both parties that in the second question referred to above, the dispute is confined to the sum of Rs. 51,295 only. The relevant assessment year is 1961-62 corresponding to the accounting year ending with June 30, 1960. The assessee is a co-operative society registered under the Co-operative Societies Act, 1912. This being an apex body, its members are the various district co-operative societies, district co-operative banks and some Government and other co-operative societies within the State of Uttar Pradesh. The principal object of the society is to regulate the distribution and supply of items like coal, sugar, cloth, etc., through the member co-operative societies. In the year in question, the assessee, inter alia, maintained that the income earned on the various advances made by it to the member societies was entitled to exemption under section 14(3) of the Indian Income-tax Act, 1922. The Income-tax Officer, while rejecting the claim for deduction on the ground of exemption on several heads, included interest of Rs. 9,000 received ....
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....he rate of 4 1/2 per cent. per annum. Such security shall be repayable with interest to the agent within one month of the expiry of the period fixed in the agreement after adjustment of accounts between the parties. The manufacturer shall have the option to realise from the said security money all losses suffered and/or expenses incurred and not paid by the agent in pursuance of the provisions of this agreement. If the said security shall fall short of Rs. two lakhs at any time, the deficiency therein shall be made good by the agent within 15 days of the notice in writing from the manufacturer." The amount of Rs. 9,000 thus represented only interest on the security deposit and could not be mixed up with the other sums received by the assessee in the course of carrying on its business. We do not think the High Court was right in concluding that this amount of Rs. 9,000 was available to be exempted under any of the clauses of section 14(3) of the Act. Admittedly, the assessee's claim does not come under clause (i) of section 14(3). Unless this sum is covered by section 14(3)(iii), there would be no exemption. The sum of Rs.two lakhs given as security in terms of the agreeme....
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....ehalf of the assessee as soon as the release orders were issued by the Government of India. The sugar so received was to be stored in godowns and was to remain under the custody of godown-keepers of the assessee or the bankers of the assessee. The salaries of the godown-keepers and the chowkidars appointed for safe custody of the stocks of sugar were to be paid by the agents . . .' The sugar so stored was to be released to the agents as and when required by them on full payment of its price at the rate fixed by the State Government or the District Magistrate concerned. The stocks of sugar taken over by the agents was to be sold by them to retailers, and permit-holders who were to be nominated by the District Magistrate or the officer authorised by him. The wholesalers' margin on the sugar sold for the period beginning September 1959, onwards with which we are concerned was Rs. 2.06 per bag. The share of the assessee and the District Cooperative Development Federations in this amount is set out in clause 18 of the agreement . . ." The High Court extracted the terms and came to hold: "It appears from a letter dated 30th September, 1959, that the various District Co-o....
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....sing or facilitating the marketing of commodities while clause (v) exempts interest on securities chargeable under section 8 or any income from property chargeable under section 9, where the total income of the co-operative society of specific types mentioned therein does not exceed Rs. 20,000. There can be no dispute on the conclusion reached by the High Court that the money provided by the assessee was by way of investment. In fact, if this money had not been made available, the business as stipulated under the scheme could not have been carried out and perhaps there would have been no business. "Investment" has not been defined in the Act. P. Ramanatha Aiyar's Law Lexicon (Reprint Edition 1987) states : "The term 'invest' is used in a sense broad enough to cover the loaning of the money but is not restricted to that mode of 'investment' or loans made on commercial paper. The word 'Invest' has been judicially defined as follows : 'To place property in business ; to place so that it will be safe and yield a profit. It is also commonly understood as giving money for some other property (as) investing funds on lands and houses. "Investment....