Law: Co-operative Societies Act (II of 1912)

Section: 2(2),43

Income-tax---Revenue receipts or capital receipts--Society doing business of manufacture and sale of sugar--Under a bye-law, certain amount which was to be deducted from price payable to member on account of sale of sugarcane was to be credited to a fund and was to be used firstly in adjusting losses of society in the working year and thereafter in repayment of initial loan and then for redeeming Govt. share and only in the event of any balance being left, it was liable to be converted into share capital--Bye-law amended with retrospective effect--Assessment year in question covered consequent to amendment--No power in society to amend bye-laws retrospectively--Held, unamended bye-law applied--Amounts deducted were revenue receipts.87 I T R 542; A I R 1972 SC 2427; A I R 1970 SC 245; A I R 1970 SC 385; A I R 1963 SC 274; A I R 1960 Mys. 326; 35 1 T R 519; A I R 1959 Punj. 453 and A I R 1956 All. 35 ref.JUDGMENT M.A.KANIA, J.--This is an appeal against the judgment of a Division Bench of the Allahabad High Court in Income-tax Reference No.67 of 1969 (reported in 1971 UPTC 813). The appeal has been filed at the instance of the Commissioner of Income-tax, U.P. 2. The relevant facts are as follows:--- The respondent (assessee) is a Co-operative Society registered under the Co-operative Societies Act 1912. It carries on the business of manufacture and sale of sugar and runs a Mill situated at Bazpur. The relevant assessment year is the assessment year 1961-62, corresponding to the accounting year 1st July, 1959 to 30th June, 1960, which was the relevant co-operative year. The assessee had established a fund called "Loss Equalization and Capital Redemption Reserve Fund". On the opening day of the year of account, namely, 1st July, 1959, a sum of Rs.l,30, 196 stood to the credit of this fund. During the relevant accounting year, the respondent society added a sum of Rs.5, 15, 863 to this Fund by deduction from the price payable by the respondent to its members for the supply of sugarcane received from its members. These deductions were made under the provisions of bye-law 50 of the Bye-laws of the respondent society, to which we shall presently come.…