1973 (3) TMI 16 - HC - Income Tax

Assessee in these cases is a co-operative society registered under the Madras Co-operative Societies Act - Whether the commission received by a society on account of an agreement with the government to store fertilisers in its godowns would be exempt and whether the commission was for user or for services - Tribunal is right in holding that the assessee is entitled to the exemption claimed and that the agreement on the basis of which the amounts were received related only to the user of the godowns and the servicing was an insignificant portion of the total sum received

Summary

Issues:
1. Whether the sum received by the co-operative society from the Government for stocking and distributing ammonium sulphate was exempt under section 14(3)(iv) of the Indian Income-tax Act, 1922?
2. Whether the Tribunal's finding that the receipts were mostly for letting out the godowns and that servicing was an insignificant portion of the total amount is reasonable and consistent with the material on record?

Analysis:
Issue 1:
The co-operative society received a sum for holding ammonium sulphate stock of the Government, storing it, and issuing it as per the agreement. The Income-tax Officer and the Appellate Assistant Commissioner held that the amount was for services rendered and not exempt. However, the Appellate Tribunal ruled in favor of the society, stating that the receipts were mostly for letting out the godowns. The Tribunal's view was that the sum was exempt under section 14(3)(iv) as it related to letting of godowns for storage. The High Court agreed with the Tribunal, emphasizing that the society acted as a stockholder for storing and distributing the fertilizers, making the sum exempt under the provision.

Issue 2:
The interpretation of section 14(3)(iv) was crucial in determining the exemption. The society argued that the payment received was for using the godowns for storage and not a strict letting out to another party. The High Court agreed with this interpretation, stating that the word "letting" should be understood broadly to include permitting the use of godowns for storage. The Court highlighted that the provision aims to exempt co-operative societies allowing the use of their godowns for storage purposes, regardless of strict leasing arrangements. The Court emphasized that the legislative intent was to exempt amounts received for permitting the use of godowns for storage, supporting the Tribunal's finding that the receipts were mostly for letting out the godowns, making them eligible for exemption under section 14(3)(iv).

In conclusion, the High Court upheld the Tribunal's decision, ruling in favor of the co-operative society and granting the exemption claimed under section 14(3)(iv) of the Indian Income-tax Act, 1922.