Ludhiana Co-operative Marketing Society Ltd. vs Commissioner of Income Tax

S.S. Sodhi, J.—The assessee, Ludhiana Co-operative Marketing Society Limited, is a co-operative society registered under the Co-operative Societies Act, 1912. The controversy here is with regard to its claim for exemption for the whole of its income on the ground that it was covered by the provisions of Section 10(29) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").

The Tribunal held that the assessee-society could not be held to be an "authority" as envisaged by the said Section 10(29) of the Act and, this is what led to the reference of the following question of law :

"Whether the Tribunal was justified in holding that the applicant is not an "authority" within the meaning of Section 10(29) under the circumstances of the case ?"

Following judicial precedents, this reference has clearly to be answered in the affirmative, in favour of the Revenue and against the assessee. In Singhal Brothers P. Ltd. Vs. Commissioner of Income Tax, the question arose, whether a company incorporated under the Companies Act, for carrying on the business of manufacture and sale of edible oils and owning a factory and godowns was an "authority" u/s 10(29) of the Act and the rental income derived by it from letting out of its godowns, was consequently exempt. In dealing with this matter, the court accepted the position that the assessee-company could not be said to be an "authority constituted under any law for the time being in force", as all that could be said was that its existence was permissive under the Companies Act and no more. Further, it was held that a joint stock company incorporated primarily for carrying on ordinary business or commercial activities cannot come within the definition of "authority" under the said sub-section.

Turning to the present case, it would be pertinent to advert to the preamble of the Co-operative Societies Act, 1912, under which the assessee-society was formed. This preamble reads as under :

"Whereas it is expedient further to facilitate the formation of Cooperative Societies for the promotion of thrift and self-help among agriculturists, artisans and persons of limited means, and for that purpose to amend the law relating to co-operative societies, it is hereby enacted as follows : . . ."

A plain reading of this preamble would show that the Co-operative Societies Act, 1912, was not a law enacted by the Legislature to create an "authority", but was enacted to facilitate the formation of co-operative societies for the purposes mentioned therein.

Another relevant aspect of the matter here is the provisions of Section 80P of the Act which deals specifically with deductions in respect of income of co-operative societies. The fact that co-operative societies have been specifically and separately dealt with in this manner, is a clear pointer to the legislative intent in not having co-operative societies fall within the ambit of Section 10(29) of the Act.

The Tribunal thus rightly held that the assessee-society was not an "authority" within the meaning of Section 10(29) of the Act. The reference is answered accordingly. There will, however, be no order as to costs.