TaxTMI 
TaxTMI 
1993 (8) TMI 2
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....aim exemption from payment of income-tax on profits and gains of its business for every assessment year, purporting to be under section 81(i)(d) of the Income-tax Act, as it stood then. According to it, amount of profits and gains of the business carried on with its members represented its income and that income in its totality was exempt from payment of income-tax under section 81(i)(d) of the Income-tax Act. But, the Income-tax Officer did not accede to the claim so made. He took the view that the income tax exemption allowed to an assessee under section 81(i)(d) of the Income-tax Act was not on the amount of gross profits and gains of business with its members but only on such portion of gross profits and gains of business includible in the computation of total income under section 110 thereof, since the income exempted from income-tax under section 81(i)(d) thereof was includible in the total income of the assessee as required by section 66 thereof. The Income-tax Officer made the assessment orders respecting all assessment years accordingly. The Appellate Assistant Commissioner, before whom the assessee preferred the appeals against the said orders of the Income-tax Officer di....
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....ive society on which no income-tax is payable under section 81(i)(d) of the Income-tax Act, it would be advantageous to excerpt the material portion of that provision, here itself : " 81. Income of co-operative societies. - Income-tax shall not be payable by a co-operative society (i) in respect of the profits and gains of business carried on by it, if it is ..... (d) a society engaged in the purchase of agricultural implements, seeds, livestock, or other articles intended for agriculture for the purpose of supplying them to its members." The said provision, as seen therefrom, undoubtedly exempts an assessee-co-operative society, which carries on the business envisaged therein, from payment of income-tax on profits and gains of such business. But the controversy which relates to the said provision is, whether the income-tax not payable thereunder, falls to be calculated either with reference to the full amount of profits and gains of the co-operative society's business, as contended on behalf of the assessee or with reference to the net amount of profits and gains of the co-operative society's business, as otherwise computable under the provisions of the Income-tax Act for the p....
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....any Central Act enacts that income-tax shall be charged for any assessment year at any rate or rates, income-tax at that rate or those rates shall be charged for that year in accordance with and subject to the provisions of this Act in respect of the total income of the previous year or previous years, as the case may be, of every person." Then section 5 tells that the total income of any previous year of a person includes all income from whatever source derived, varying, of course, according to the factor of residence. When we come to section 66, it requires that in computing the total income of an assessee, there shall be included all income on which no income-tax is payable under Chapter VII thereof. What needs to be noticed here is, that clause (45) of section 2 defines "total income" as the total amount of income referred to in section 5 computed in the manner laid down in the Income-tax Act. Then comes section 110. It provides for the mode of computing the tax in cases where the exempted income is included in the total income. It reads : "Where there is included in the total income of an assessee any income on which no income-tax is payable under the provisions of this Act....
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....0, which directly bear on the controversy. In Anakapalli Co-operative Marketing Society's case, [1989] 175 ITR 584 (AP), the question referred for the decision of the Andhra Pradesh High Court under section 256(1) of the Income-tax Act was (at page 585): "Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the entire amount of Rs. 3,72,038 relating to marketing of agricultural produce of its members and interest on loans given to its members should be allowed as deduction under section 80P(2)(a) of the Income-tax Act, and not Rs. 73,720 with reference to the proportionate net profit referable to those activities only?" Section 80P, which provided for exemption to a co-operative society from payment of income-tax, was incorporated in the Income-tax Act with effect from April 1, 1968, by deletion of section 81, with which we have dealt. The material portion of section 80P read thus : "80P. (1) Where, in the case of an assessee being a co-operative society, the gross total income includes any income referred to in sub-section (2), there shall be deducted, in accordance with and subject to the provisions of this section, ....
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....here, this court was concerned with the interpretation to be placed on section 80M of the Income-tax Act. That section read thus (at page 132) : "80M. Deduction in respect of certain inter-corporate dividends.(1) Where the gross total income of an assessee being a company includes any income by way of dividends received by it from a domestic company, there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends of an amount equal to- (a) where the assessee is a foreign company (i) in respect of such income by way of 80% of such income ; dividends received by it from an Indian company which is not such a company as is referred to in section 108 and which is mainly engaged in a priority industry (ii) in respect of such income by way of 65% of such income ; dividends other than the dividends referred to in sub-clause (i) (b) where the assessee is a domestic company in respect of any such income by 60% of such income." way of dividends The requirement of the above sub-section (1) of section 80M of the Income-tax Act, according to the Constitution Bench, was t....