Cit Vs. Rajasthan Rajya Bunker Sahakari Sangh Ltd. - Court Judgment

Excerpt:

counsels: r.b. mathur, for the revenue a. kasliwal, for the assessee in the rajasthan high court, jaipur bench y.r. meena & a.c. goyal, jj. - .....society engaged in the marketing of the produce of members of primary society and to supply the members of primary society raw material for manufacturing through primary society. by this activity assessee has shown gross profit of rs. 46,28,915.3. the assessing officer has negatived the claim of the assessee on the ground that the assessee-society has no direct dealing with the weavers, but it helps the weavers through primary society.4. in appeal before the commissioner (appeals), the commissioner (appeals) has allowed the claim of the assessee following the decision of the kerala high court in the case of cit v. kerala state co-operative marketing federation ltd. : [1992]193itr624(ker) .5. in appeal before the tribunal, the tribunal has considered the decision of the kerala high court in kerala state co-operative marketing federation ltd.'s case (supra) and also the decision of the allahabad high court in addl. cit v. hastkala pital udyog sahkari samiti ltd. : [1978]114itr723(all) . the tribunal has also considered the decision of the madhya pradesh high court in the case of cit v. m.p. state handloom weavers co-operative society ltd. : [1998]231itr243(mp) . finally, the.....

Judgment:

ORDER

This appeal is directed against the judgment and order of the Tribunal. The basic question for consideration in this appeal is whether the assessee-society is entitled for benefit of deduction under section 80P(2)(a)(ii).

2. The assessee is a co-operative society engaged in the marketing of the produce of members of primary society and to supply the members of primary society raw material for manufacturing through primary society. By this activity assessee has shown gross profit of Rs. 46,28,915.

3. The assessing officer has negatived the claim of the assessee on the ground that the assessee-society has no direct dealing with the weavers, but it helps the weavers through primary society.

4. In appeal before the Commissioner (Appeals), the Commissioner (Appeals) has allowed the claim of the assessee following the decision of the Kerala High Court in the case of CIT v. Kerala State Co-operative Marketing Federation Ltd. : [1992]193ITR624(Ker) .

5. In appeal before the Tribunal, the Tribunal has considered the decision of the Kerala High Court in Kerala State Co-operative Marketing Federation Ltd.'s case (supra) and also the decision of the Allahabad High Court in Addl. CIT v. Hastkala Pital Udyog Sahkari Samiti Ltd. : [1978]114ITR723(All) . The Tribunal has also considered the decision of the Madhya Pradesh High Court in the case of CIT v. M.P. State Handloom Weavers Co-operative Society Ltd. : [1998]231ITR243(MP) . Finally, the Tribunal has relied on the decision of the Supreme Court in the case of Kerala State Co-operative Marketing Federation Ltd. v. CIT : [1998]231ITR814(SC) and confirmed the view taken by the Commissioner (Appeals).

6. Mr. Mathur, the learned counsel for the revenue, submits that the decision of the Apex Court in Kerala State Co-operative Marketing Federation Ltd.'s case (supra), was on section 80P(2)(a)(iii) and not on section 80P(2)(a)(ii), while the assessee has claimed a deduction under section 80P(2)(a)(ii). Mr. Mathur places reliance on the decision of the Allahabad High Court and also on the decision of the Supreme Court in the case of U.P. Co-operative Cane Union Federation Ltd. v. CIT : [1999]237ITR574(SC) wherein, their Lordships held that for the assessee the meaning of word 'members' is normally used in the sense of, Members of the society and not the members of the member society. If the weavers are the members of the member society, then apex body of the society is not entitled for benefit of deduction under section 80P(2)(a)(ii).

7. Whether the assessee-society is entitled for benefit of the exemption under section 80P(2)(a)(ii), we have to consider its activities and objects. The assessee-society is a co-operative society engaged in the manufacturing of cloth under Janta Cloth Scheme of Government of India through the conduct of primary societies carried out at grass-root level by individual weavers at their cottage for which the assessee purchases the yarn and gives it to weavers for weaving and, in turn, the assessee gives weaving charges to the weavers through primary society and the whole production process is monitored /supervised by the assessee. After manufacturing of cloth, the cloth is sold by the assessee.

8. The fact is not in dispute that the assessee-society has power to direct, supervise and control over the manufacturing of cloth through the primary societies which are the members of assessee-society. Members of primary society run cottage industries in their houses, in these circumstances, it cannot be said that assessee-company is not engaged in the manufacturing activities carried on by the weavers. The weavers get the raw material, i.e., yarn through their primary society, but thereafter weaving charges are paid by the assessee and it purchases those cloths through primary societies.

9. When the assessee-society has full control over the manufacturing activities of weavers, it is engaged in the cottage industry. When the assessee is engaged in the cottage industry through primary society, the benefit cannot be denied considering the scheme of the Act and object of the provision to be achieved to give benefit to the weavers and to encourage such societies for the benefit of the weavers.

10. In the result, we find no force in this appeal. Consequently, the appeal is dismissed.