Gulbarga District Co-operative Central Bank Ltd. vs Regional Transport Officer and Others

N. Venkatachala, J.—The short question which arises for decision in this writ petition, is whether the Gulbarga District Co-operative Central Bank Ltd,, is a company within the meaning of Explanation (3) of the Schedule to the Karnataka Motor Vehicles Taxation Act, 1957 (for short " the Act "), for making it liable for payment of tax respecting its jeep a motor car, under item 14 of Pat A of the Schedule to the Act.

The circumstances which have given rise o the above question are briefly these : The Gulbarga District Co-operative Central Bank Ltd., a co-operative society registered under the Karnataka Co-operative Societies Act, 1960 (for short " the Societies Act"), which is the petitioner here, purchased a new jeep in the beginning of August, 1986. Immediately thereafter, it made an application to the Regional Transport Officer, Gulbaraga ( respondent No. 1 here), for its registration under the Motor Vehicles Act, 1939. At that time, it offered to pay respondent No. 1 an advance annual tax for that jeep computed under item 16 of Part A of the Schedule to the Act. But, respondent No. 1 demanded from the petitioner a higher advance annual tax for that jeep on his view that the petitioner was a company within the meaning of Explanation (3) of the Schedule to the Act and that a jeep regarded as a motor car owned by it was liable to tax computable under item 14 of part A of the schedule to the Act The appeal carried by the petitioner against the demand,, to the Deputy Commissioner for Transport, Gulbarga Division ( respondent No. 2 here ), did not succeed, in that, the latter affirmed the demand and dismissed the appeal. The endorsement dated August 13, 1986, by which the said demand is made by respondent No. 1,, and the appellate order dated September 25, 1986, by which that demand is affirmed by respondent No. 2,, are impugned in this petition filed by the petitioner.

As the validity or otherwise of the impugned endorsement and the appellate order has to necessarily depend upon the decision to be made on the question formulated at the outset, I shall proceed to decide it.

Consideration of the question may be begun by referring to the statutory provisions of materiality.

Explanation (3) of the Schedule to the Act:

"(3) For the purpose of item 14 Part A ........ ''company'' means an association of a number of individuals for the purpose of carrying on trade and other legitimate business; a number of persons united for the purpose or in a joint concern for profit as a company of merchants, private partnerships or incorporated body of men, firm,house or partnership or a corporation."

Section 2 of the Societies Act:

" 2. Definitions. - In this Act, unless the context otherwise requires._

(a) '' bye-laws '' means the bye-laws registered or deemed to be registered under this Act and for the time being in force and includes a registered amendment of the bye-law....:

(d) ''Co-operative society'' means a society registered or deemed to be registered under this Act:"

Section 4 of the Societies Act :

"4. Societies which may be registered.- Subject to the provisions of this Act, a co-operative society which has its objects to promotion of the economic interests or general welfare of its members, or of the public in accordance with the co-operative principles,, or a co- operative society established with the object of facilitating the operations of such a society, may be registered under this Act:

Provided that no co-operative society shall be registered if it is likely to be economically unsound, or the registration of which may have an adverse effect on development of the co;-operative movement."

Section 16 of the Societies Act refers to individuals competent to contract, any other co-operative society, State Government, Life Insurance Corporation of India, a firm or a society registered under the Karnataka Societies Registration Act, the State Warehousing Corporation, among others, as those who may become members of a co- operative society.

Section 30 of the Societies Act empowers the Registrar to supersede a managing committee of a society. Section30(a) thereof empowers the State Government to appoint a special officer to manage the affairs of a society. Section 30(b) there of empowers the State Government to give directions in public interest in the matter of proper management of the business of a co-operative society.

Section 57 of the Societies Act impose restrictions in the matter of payment of profits by a co-operative society to its members.

The Gulbarga District Co-operative Central Bank Ltd.(petitioner here) is declared by bye-laws 1 of its bye-laws as a registered co- operative society under the Societies Act. Bye-law 6 thereof restricts the membership of the Gulbarga District Co-operative Central Bank Ltd., to co-operative societies in the local area, the State Government and the State Co-operative bank.

It was the submission of Smt. K.S.Lalitha, learned counsel for the petitioner, that the petitioner, the Gulbaraga District Co-operative Central Bank Ltd., which is a co-operative society under the Societies Act and which, according to its bye-laws, has as its members, other co-operative bank, and which functions under the provisions of the Societies Act,, subject to the control of the Registrar and the State Government as provided therefore, cannot be regarded as a "company" under Explanation (3) of the Schedule to the Act. It was her further submission that when the petitioner cannot be a "company" within the meaning of Explanation (3) of the Schedule to the Act, the jeep owned by it admittedly regarded as a motor car for the purposes of the Act,, cannot become liable for payment of tax item 14 of Part A, of the schedule to the Act.

On the contrary, it was the submission of Shri. P.R. Ramesh, learned High Court Government Pleader, that the petitioner, the Gulbarga District Co-operative Central Bank Ltd., has to be regarded as a "Company" within the meaning of Explanation (30 of the Schedule to the Act. According to him, though the members of the Gulbarga District Co-operative Central Bank Ltd., are co-operative societies of the local area, since those co-operative societies will have individuals as their members, the Gulbarga District Co-operative Central Bank Ltd., has to be regarded as an association of a number of individuals formed for the purpose of carrying on trade or other legitimate business falling within the meaning of "company" in Explanation (3).

I shall now proceed to consider the question in the light of the statutory provisions adverted to earlier as also the submissions of learned counsel adverted to above.

A jeep is admittedly a motor car for the purpose of the Act. If a motor car is owned by a company, the tax liability of such car arises under item 14 of Part A of the Schedule to the Act,, is undisputed. "Company" contemplated under item 14 of Part A of the Schedule to the Act is referable to a company falling in Explanation (3) thereof is also not disputed. What remains to be considered is whether the petitioner is a "company" within the meaning of Explanation (3) of the Schedule to the Act. Since the petitioner is a co-operative society is a "company" within the meaning of Explanation (3).

A "company" a could be seen from Explanation (3) means (i) an association of individuals formed for the purpose of carrying on trade or other legitimate business; (ii) a group of persons who are united or have formed a joint concern to carbon trade or other business for profit, like a company of merchants, private partnership, incorporated body of men,, firm, or house,, partnership or a corporation. A co-operative society,, in my view, does not answer the description of a "company" falling in either of the categories of Explanation (3). To be precise, a co-operative society cannot be come an association of individuals as would answer the description of a "company" in category (i) because its membership is not confined to individuals,, but extends to other co-operative societies,, the State Government, Life insurance Corporation of India, a firm, or society registered under the karnataka Societies Act and so on, as becomes clear from section 16 of the Societies Act. In the same way, a co;-operative society cannot be a unit or a concern of persons (who have) joined together to carry on trade or business for earning profit and sharing the same like a company of merchants,, a private partnership, an incorporated body of men, firm or house, a partnership or a corporation, as would answer the description of a "company" in category (ii), firstly,, because the person becoming the members of a co-operative society are not entitled to claim the share of profit earned by it in its trade or business, as becomes clear from section 57 of the Societies Act; and secondly, because a co-operative society is not free to earn profits like a company of merchants or a partnership, in that, it is prohibited from earning profit at the cost of co-operative principles under which it has to function and the co-operative movement which it has to advance, as becomes clear from section 4 of the Societies Act. Besides, if the Legislature intended that a co-operative society, whose creation, functioning, control including dissolution. are regulated by the Societies Act, as seen from its provisions adverted to earlier, should fall within the meaning of "company"in Explanation (30 it would not have been difficult for it to include the same specification that Explanation particularly when under some items in the schedule to the Act, it has made a specific reference to different types of co-operative societies for certain purposes Hence,I am of the view that a co-operative society is not a "company" within the meaning of Explanation (3).

The submission of the learned High Court Government Pleader that the Gulbarga District Co-operative Central Bank ltd., which has, as its members,, co-operative Societies in the local area, could be regarded as an association of a number of individuals formed for the purpose of carrying on trade or other legitimate business within the meaning of "company" in category (i) of the Explanation, because the co;- operative societies,, which may be the members of the Gulbarga District Co-operative Central Bank Ltd. have individuals as their members,, is devoid of merit. As seen from the bye-laws of the Gulbarga District Co-operative Central Bank Ltd.,, its members are co-operative societies in the local area,, the State Government and the State Co-operative bank. "Company " in category (i) of Explanation (3) contemplates an association comprised of individuals, that is , natural persons and not co-operative societies or Government or State Co-operative bank, that is, artificial persons. If that is so, the Gulbarga District Co-operative Central Bank Ltd cannot be regarded as a "company" in Explanation (3).

Thus, the petitioner - the Gulbarga District Co-operative Central Bank Ltd.- is not a company within the meaning of Explanation (3) of the Schedule to the Act for making it liable for payment of tax respecting its jeep, motor car, under item 14 of the Part A of the Schedule to the Act. Hence, the demand notice as also the appellate order impugned in this writ petition cannot be sustained.

In the result, I allow this writ petition and quash the impugned endorsement and the appellate order.