1969 (5) TMI 7 - HC - Income Tax

Exemption claimed u/s 14(3)(iv) of the IT Act, 1922, in respect of its income from interest on securities and from property for the assessment year 1961-62 - Tribunal was right in law in holding that the assessee was an urban consumers society and was, therefore, not entitled to exemption from income-tax u/s 81(v) of the IT Act, 1961

Summary

Issues Involved:
1. Interpretation of the expression "urban consumers' co-operative society."
2. Eligibility for income tax exemption under section 14(3)(iv) of the Indian Income-tax Act, 1922, and section 81(v) of the Income-tax Act, 1961.
3. Whether the assessee qualifies as an "urban consumers' co-operative society."
4. Applicability of definitions from other Co-operative Societies Acts.
5. Exclusivity of activities for claiming exemptions.

Detailed Analysis:

1. Interpretation of the Expression "Urban Consumers' Co-operative Society":
The primary issue involves the interpretation of the term "urban consumers' co-operative society" as it appears in section 14(3)(iv) of the Indian Income-tax Act, 1922 (old Act), and section 81(v) of the Income-tax Act, 1961 (new Act). The court examined the statutory definitions provided in the respective Acts. The old Act defines it as a "society for the benefit of consumers within the limits of a municipal corporation, municipality, municipal committee, notified area committee, town area or cantonment." The new Act contains a similar definition.

2. Eligibility for Income Tax Exemption:
The assessee, a co-operative society engaged in banking and trading operations, sought exemption from income tax on interest from securities and income from properties. Under the old Act, section 14(3)(iv) and under the new Act, section 81(v), exemptions are applicable if the total income does not exceed twenty thousand rupees and the society is not an urban consumers' society, among other categories.

3. Whether the Assessee Qualifies as an "Urban Consumers' Co-operative Society":
The Income-tax Officer denied the exemption on the grounds that the assessee was an urban consumers' society. This finding was upheld by the Appellate Assistant Commissioner and the Income-tax Appellate Tribunal. The court had to determine whether the assessee's activities classified it as such a society. The court concluded that the assessee served consumers within the Mysore municipality limits, fitting the statutory definition.

4. Applicability of Definitions from Other Co-operative Societies Acts:
The assessee argued that it should not be considered an urban consumers' society because it did not distribute profits among its members and other consumers, as defined in the Delhi and Maharashtra Co-operative Societies Acts. The court rejected this argument, stating that the definitions in those Acts are not applicable to the Income-tax Acts, which provide their exhaustive definitions.

5. Exclusivity of Activities for Claiming Exemptions:
The assessee contended that a society should only be excluded from exemption if it exclusively carried out activities of an urban consumers' society. The court disagreed, stating that the statutory provisions do not require exclusivity. A society conducting multiple activities, including those of an urban consumers' society, is still disqualified from exemption.

Conclusion:
The court held that the assessee was indeed an urban consumers' society under the definitions provided in both the old and new Acts. Consequently, the assessee was not entitled to the claimed exemptions for the assessment years 1961-62 and 1962-63. The answers to the referred questions were against the assessee, affirming the decisions of the Appellate Tribunal. No direction was made regarding costs.